31 9Ig

AA5I60 7

INDIGENOUS PRIVATE ENTERPRISE IN

NIGERIA

THESIS

Presented to the Graduate Council of the

North Texas State University in Partial

Fulfillment of the Requirements

For the Degree of

Master of Arts

By

Shitah, Chapi Martin

Denton, Texas

May, 1984

:.o:H ,.,.r..._.,. ,. ;.:o.. -, :. -- c. .. ,...., .. . e..n ,. .... n .. _ ._ _... : .. _ _ -p ia ::-

Shitah, Chapi Martin, Indigenous Private Enterprise

in Nigeria. Master of Arts (Economics), May, 1984,

125 pp., 4 tables, bibliography, 152 titles.

This study is directed towards the relationship

between the economic environment in Nigeria and its

indigenous private sector from 1960 to 1980. Nigeria

practices mixed capitalism aided by the national

government, foreign governments and international

agencies.

The 1972 and 1977 Indigenization Decrees were passed

to eliminate foreigners from certain economic fields to be

replaced by Nigerian citizens. The economic environment

of Nigeria is less than suitable for the operation of

modern business. Roads, telephones, telex services,

electricity services, law and order and a few other

critical underpinnings of business are inefficiently

provided for in the economic system of the country.

Despite the unfortunate economic environment Nigerian

Entrepreneurs, especially the Ibos, have been particularly

industrious. However, indigenous private enterprise in

the country has not been especially successful.

TABLE OF CONTENTS

Page

LIST OF TABLES-.... . . . . . . . . . . . . .. . . vi

LIST OF ILLUSTRATIONS........................... vii

Chapter

I. INTRODUCTION: A BRIEF HISTORICALPERSPECTIVE.....". . .

Geography and PopulationThe Economy and the GovernmentFinanceMining, Agriculture, Industry and Labor

MiningAgricultureIndustryTransport and communications

Health, Education and Social WelfareHealthEducationSocial welfare

Religion

II. DEVELOPMENT POLICIES IN NIGERIA . . . . . . . 17

Pre-Civil War PeriodPost-Civil War Period

III. INDIGENIZATION POLICY IN NIGERIA . . . . . . . 35

Why Indigenization?Indigenization Decree of 1972

The main features of the decreeImplementation of Decree

Causes of the massive noncompliance ofThe 1972 indigenization decree

The Indigenization Decree of 1977The main features of the decreeThe Nigerian Enterprises Promotion

Board under the 1977 IndigenizationDecree

IV. ECONOMIC ENVIRONMENT IN NIGERIA.... ..... . . . . 68

Construction and Maintaining Roads inNigeria

Railways in NigeriaNigerian PortsElectric EnergyCommunicationsEducationLaw and OrderInaccessibility to Information

V. ENTREPRENEURSHIP IN NIGERIA....... . . . . 92

The Importance of Entrepreneurshipin Nigeria

The Nature of EntrepreneursTrustworthiness in the Nigerian Business

SocietyEntrepreneurship and Education . . . . .

VI. SUMMARY AND CONCLUSION....... . . . . . .. . . 102

APPENDIX . .. . . . . . . . . . . . . . ... . . .

BIBLIOGRAPHY............................... ....

PageChapter

LIST OF TABLES

Table Page

I. Principal Economic Indicators . . . . . . . 7

II. Balance of Payments (1977) . . . . . . . . . 8

III. Gross Domestic Product by EconomicActivity (1970-1977) . . . . . . . . . . . . 8

IV. Nigerian Grade School Enrollments . . . . . . . 87

vi

' - - -

LIST OF ILLUSTRATIONS

Page

1. Nigeria: Geographical Location . . . . . .

2. Nigeria: Chief Tribes.. . . . . . .

vii

Figure

2

4

CHAPTER I

INTRODUCTION

A BRIEF HISTORICAL PERSPECTIVE

The major focus of this study will be upon the

relationship between the indigenous private sector and the

economic environment in Nigeria between 1960 and 1980. An

effectively functioning indigenous private sector provides

the greatest possible assurance for long term sustained

economic development.

Geography and Population

Nigeria, which is one of the developing countries on

the west coast of Africa, has a total land area of 356,668

square miles. It is nearly four times the size of Ghana,

thirteen times the size of Sierra Leone and three times

the size of the United Kingdom.' It lies in the tropics

between latitudes 4N and 14 N, and also between

longitudes 2E and 15 E. Nigeria is bounded on the north

by Niger and Chad, on the west by Benin, formerly called

Dahomey, on the east by Cameroun and on the south by the

Gulf of Guinea. Figure 1 shows Nigeria's location on the

west coast of Africa. The country is divided into

lW. A. Perkins and Jasper H. Stembridge, Nigeria: ADescriptive Geography (Ibadan, 1966), p. 1.

1

.0.0 NOR WN Fw - W mpowl"Now

2

NIGER CHAD

So toNgrK

*Nguru CHADKauraNamoda -

Sokoto Kano

'Maiduguri

DAHOMEY Gongola

/KAI JI KadunLAKE Bauchi

Waw 4 Kainji osDam '~~%i na

'ShendamLlorin Baro-

TKOgun , Oyo .Beu

' ~Lokoj a

7 adan .. CAMEROONKaisina Ala

IdogoEAAOsse

Porto Lagos ' Benin Ci y ug

Novo

ross

art

Harcour

GULF OF GUINE A Victoria

Malabo

Kribi

EQUATORIAL

GUINEABata

Figure 1

Geographical Location of Nigeria

3

nineteen states: Sokoto, Kaduna, Kano, Borno, Plateau,

Gongola, Niger, Bauchi, Kwara, Lagos, Cross River, Rivers,

Anambra, Bendel, Oyo, Imo, Ondo, Benue, and Ogum. Each

state is ruled by its own governor. The present capital

is Lagos with a population of about 1.5 million,2 but the

government has announced plans to move it to Abuja in

Niger State.3

Nigeria, with 90 million people,4 is the most

populated country in Africa. Of the 250 or more tribes

which constitute the Nigerian population, the three

largest are the Ibo, the Hausa and the Yoruba.5 The Ibo

live in the Southeast, the Hausa in the North and the

Yoruba in the Southwest. Figure 2 shows the general

locations of nine of the major tribes.

The official language of Nigeria is English;6

however, each tribe has its own language. Among the

tribal languages, Hausa comes closest to being a "lingua

franca," followed closely by Ibo and Yoruba.

2George Thomas Kurian, "Population of the NigerianCapital of Lagos," Encyclopedia of the Third World, 1980ed.

3 John Paxton, editor, "The Nigerian Capital," The

Statesman's Year-Book (New York, 1982-1983), p. 930.

4lbid.

5 Perkins and Jasper, A Descriptive Geography, p. 3.

6 Frederick A. V. Schwarz, Jr., Nigeria: The Tribes,the Nation, or the Race (Cambridge, Massaciusetts,T95),pp. 39. _

4

Kanuri

Hausa

Fulani

Nupe

Yoruba

Edo

Ibo

Anang

Ibibio

Nigeria: Chief Tribes

.AW W.4

Figure 2:

5.

The Economy and the Government

Nigeria, in both a political and economic sense, is

the strongest country on the west coast of Africa.7

Independence was achieved on October 1st, 1960, and a

transitional government ruled until 1963 when Dr. Nnamdi

Azikiwe was elected President of the New Republic. The

first Prime Minister was Alhaji Abubakar Tafawa Balewa.

During the civilian rule that ended in 1966, the federal

government consisted of a Council of Ministers presided

over by the Prime Minister, a Senate, a House of

Representatives. The head of state was the President, who

was elected for a five-year term, after which he could be

re-elected for another term.8 However, by the 1979

Constitution, a President was elected for only a four year

term and could be re-elected for another term. A

President was allowed to serve only two terms.9

When the army took power by a coup d'etat in 1966,

the country was ruled by the Supreme Military Council,

7R. Oulferni Ekudare, An Economic History of Nigeria:1860-1969 (New York), p. 1.

8Republic of Nigeria, The Constitution of the Federal

Republic of Nigeria, 19 6 3 (Lagos, 1963).

9 Republic of Nigeria, The Constitution of the Federal

Republic of Nigeria, 1979 (Lagos-1979).

-- - -I- -- owwww"UNWAR- .FdN! r c'11

. _

6.

presided over by the Commander-in-Chief, General Gowan.'0

In 1975, Gowan was ousted in a bloodless coup and replaced

by Brigadier Murtala Ramat Muhammed, who was later

assassinated in the course of an abortive coup in which

General Gowan was suspected to have been involved."

In 1978, with Lt. General Olusegun Obasanjo as the

new Head of State, the state military governments were

abolished and the ban on political parties was lifted.12

Then a new constitution was approved by the military

government. By 1979, a new House of Representatives and

Senate elections were held and finally in a contested

presidential election, Shehu Shagari was elected and still

is the nation's first civilian president since the civil

war.13

Nigeria's market economy is based on crude oil

production. The mineral rights, and hence the crude

itself, is owned and sold by the government. A strong

private sector exists, however, in manufacturing,

commerce, agriculture and service. Tables I-III below

show the principal economic indicators for Nigeria.

10 Harold D. Nelson, editor, Nigerian Area Handbook

(Washington, D.C., 1980), p. 67.

"Ibid.

'2 Ibid., p. 70.

'3 Ibid., pp. 191, 211-215.

7

TABLE I

PRINCIPAL ECONOMIC INDICATORS

Gross National Product: $45.270 billion (1978)World Rank: 34GNP Annual Growth Rate: 7.1% (1970-77)Per Capita GNP: $560.00 (1978)World Rank: 76Per Capita GNP Annual Growth Rate: 4.4% (1970-77)World Rank: 25Gross Domestic Product: N9.119 Billion ($13.86 Billion)

(1973)World Rank: 14GDP Annual Growth Rate: 7.61% (1965-73)Per Capita GDP: N152 ($231.00) (1973)Per Capita GIP Annual Growth Rate: 4.8% (1965-73)World Rank: 19Income Distribution: Information not availablePercentage of Population in Absolute Poverty: 30Consumer Price Index (1970 = 100)All Items: 190.5 (June 1979)Food: 191.8 (June 1979)Money Supply: N6.481 Billion (June 1979)Average Annual Rate of Inflation 1970-1978: 18.2Reserve Money: N4.112 Billion (June 1980)Currency in Circulation: N2.455 Billion (June-1979)International Reserves: $10.373 Billion, of which foreign

exchange reserves were 9.766 Billion (September 1980)

Source: Encyclopedia of the 3rd World, 1980.

8

TABLE II

BALANCE OF PAYMENTS(Million)

Merchandise Exports . . . . .Merchandise Imports . . . . .Other Exports . . . . . . -..Other Imports.. . . . . . .

Private Unrequited TransfersOfficial Unrequited TransfersDirect Investment . . . . ..Portfolio Investment . .Other Long Term Capital . .Other Short Term Capital .Net Errors & Omission . .

(1977)

16,734-11,800

616- 3,945

34338

301

93310

730

Source: Encyclopedia of the 3rd World Countries,198.

TABLE III

GROSS DOMESTIC PRODUCT BY ECONOMIC ACTIVITY(1970-1977)

Rate of Change

AgricultureMiningManufacturingConstructionElectricity, Gas & WaterTransportation and

CommunicationsTrade and FinancePublic Administration

and DefenseOther Branches

30.832.08.15.70.5

3.1

5.714.1

-1.58.1

13.424.718.2

16.5

24.63.0

Source: Encyclopedia of the 3rd World Countries,1980.

.. _ .,. ,.,yy ._ .::,- .,: -A n7rrt ='xt'- _ - .. _ ,w .'4 -,w,. vw:t.-r :." s,...... _ _

3 = .- r

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9

A series of economic development plans were initiated

shortly after independence. The first plan ran from 1962

to 1968, the second from 1971 to 1974 and the third from

1975 to 1980.14 Included in the third plan were universal

free primary education, a basic health scheme, an iron and

steel project, two liquefied natural gas plants, a

petrochemical complex, two new refineries and

modernization of the railways, seaports and airports.

This plan was to be financed primarily by revenues from

the oil sector.1 5

Finance

The unit of currency used in Nigeria is the naira

consisting of 100 kobo. The naira came into use in 1973

to replace the Nigerian pound with an exchange rate of 42

= Nfl. In July 1980, the dollar rate was 1. = $1.8716.16

The Central Bank of Nigeria regulates domestic and

commercial banking while the Ministry of Finance controls

foreign banking in the country. By the Indigenization

Decree of 1977, all foreign owned banks were required to

1 4 George Thomas Kurian, "The First, Second, and ThirdNigerian Development Plans," Encyclopedia of the ThirdWorld, 1980 ed.

15 Nigerian Ministry of Economic Development, ThirdNational Development Plan 1975-1980, Vol. II of Projectsummary (Lagos, 1975), p. T55.

1 6Nigeria, International Monetary Fund, InternationalFinance Statistics, December 1981 (Washington, D.C.).

10

have 60% Nigerian ownership.1 7 The most frequently used

source of development finance in Nigeria is the Nigerian

Industrial Development Bank.

Mining, Agriculture, Industry

and Labor

Mining

Nigeria is a land blessed with mineral resources,

especially oil. Of much less economic significance are

deposits of zinc, lead, gold, coal and tin. The country

is also noted for its production of 90% of the world's

supply of columbite.18 Columbite is a hard black mineral

of iron. It is used in super alloys for the world's

aerospace industry, as well as high-strength low-alloy

steels, stainless steel, and other alloy steels.1 9

Agriculture

Shifting cultivation is the method of farming applied

in Nigeria. This is a system whereby a piece of farm land

is used and then allowed to lie idle during the subsequent

1 7 Nigeria, Third Development Plan, p. 183; see alsoNigeria's Indigenous Policy, editedhby The NigerianEconomic Society IadaTn, 1975), p. 15.

1 8 George Thomas Kurian, "Mining," Encyclopedia of theThird World, 1980 ed.

19 Harold D. Nelson, editor, Nigeria: A Country Study(Washington, C.C., 1982), p. 167.

..

11

growing season. In this way, the fertility of the land is

regained and becomes ready for more effective cultivation

of crops. A similar method of farming is the bush fallow

system of cultivation.2 0

The main products are cassava, yams, cocoyams, corn,

rice, cow peas, guinea corn, and millet.

In order to ameliorate the relative shortage of food

in the country the military government in 1976 introduced

an emergency program called "Operation Feed the Nation."

The area under cultivation for subsistence and cash crops

was to be considerably increased.2 1 The Nigerian

Agricultural Bank is the principal source of credit for

Nigerian farmers.22

Industry

Even though the federal and state governments

welcomed foreign investments, the Nigerian Enterprise

Promotion Decree of 1977, also known as the

"Indigenization Decree," placed limitations on the share

of foreign equity permitted in Nigerian firms, barred

alien participation in certain types of industries and

20 Perkins and Jasper, A Descriptive Geography, p. 59.

21 Nigerian Third Development Plan, 1975 to 1980; seealso Oyeleze 0. Nigerian Government and PTliFies UnderMilitary Rule: 1966-1979 (New York), p. 57.

22Ibid.

-I

made "indigenization" mandatory.23 This decree was an

adjustment of the "1972 Nigerian Enterprise Promotion

Decree" designed to correct problems that had arisen with

the 1972 Decree.

The labor force in Nigeria in 1975 was about 33

million of which 39% were women. 24 The country does not

have any general minimum wage law; however, the state

governments have established some uniform rates for

general laborers and the federal government does have the

authority to set minimum wage rates in any sector where

very low wage rates exist. Working conditions in the

country are governed by law. In 1971 the work week was 40

hours, with overtime paid at increased rates for work done

on weekdays, Sundays and holidays.2 5

Although labor unions exist in Nigeria they have very

little economic or political influence.26 The largest

labor union is the Nigerian Labor Congress which was

2 3 Nigerian Enterprises Promotion Decree, 1977 (Lagos:

Nigerian Enterprises Promotion Board.

2 4 George Thomas Kurian, "Labor in Nigeria,"

Encyclopedia of the Third World, 1980 ed.

2 5 Nelson, A Country Study, p. 96.

2 6 Robin Cohen, Labour and Politics in Nigeria,1945-1971 (New YorkJ74)T, p. 166-.68.

12

-----

13

founded in 1975 through the merger of the Nigerian Trade

Union Congress, the Nigerian Worker's Council, the Labour

Unity Front and the United Labour Congress. In 1966,

there were 625 trade unions with 491,000 members.27

Transport and Communications

The railway system in Nigeria is run by the

state-owned Nigerian Railway Corporation and consists of

2,178 miles of single track in two north/south rail lines.

The western line runs from Lagos to Kaduna, while the

eastern line runs from Port Harcourt through Enugu and

Makurdi to join the western line at Kaduna.28

The navigable waterways in Nigeria are mainly the

Niger and the Benue Rivers. There are three chief

seaports in Nigeria: (1) Lagos, which handles 80% of the

country's annual imports and exports, (2) Port Harcourt,

and (3) Wari.2 9

Roads in Nigeria are divided into three categories:

(1) Trunk A, maintained by the federal government, links

Lagos with the state capitals; (2) Trunk B roads,

maintained by state governments, connects provincial

capitals and other large towns with the Trunk A system;

2 7 Nelson, A Country Study, p. 185.

28_bid., p. 174-176.

29Ibid., p. 179.

14

and (3) other roads maintained by local governments and as

feeders to the trunk road system30 All Trunk A and most

Trunk B roads are paved and these cover a distance of 9501

miles.31 The Trans-African Highway links Lagos with

Mombasa in Kenya.

Nigerian Airways is the national airline and operates

a fleet of aircrafts within the country and internation-

ally. There are ninety-one airports in the country, the

largest of which is the Murtala Muhammed International

Airport at Lagos, which was formerly known as Ikeja

Airport.

The national telephone system is owned and operated

by the federal government.3 2

Health, Education and Social Welfare

Health

There are very few hospitals in Nigeria considering

the large population of the country. Nigeria is one of

30 Ibid., pp. 37-38.

31 George Thomas Kurian, "Roads in Nigeria,"Encyclopedia of the Third World, 1980 ed.

3 2 Harold D. Nelson, editor, Nigeria: Area Handbook,

(Washington, D.C., 1982), p. 209.

m .. r ~

15

the most disease ridden areas on the west coast of Africa

and has a great need for physicians throughout the

country.

Education

Education in Nigeria consists of seven years of

primary school and five years of secondary school. The

shortages of schools and trained teachers in Nigeria are

the roots of the serious educational problems facing the

country.

Primary and secondary school administration fall

under the jurisdiction of the state governments. The

federal government, however, is responsible for all

education policy and owns and administers six of the

country's twelve universities. Nigeria has a national

literacy rate of only 25%.34

Social Welfare

There is a social welfare system in Nigeria which is

financed by the National Provident Fund and provides for

sickness, retirement and old age benefits.3 5

Ibid.,p. 134.

34 George Thomas Kurian, "Education in Nigeria,"Encyclopedia of the Third World, 1980 ed.

3 5 Charles V. Brown, The Nigerian Banking System,(Evanston, 1966), p. 168.

16

Religion

In the south, the Ibos are predominantly Christians

while in the north the Hausas are almost entirely Muslims.

The Christians in Nigeria are almost evenly divided

between Roman Catholic and the Protestant Churches.

The development policy in Nigeria between 1960 and

1980 will be discussed in Chapter II. Chapter III will

discuss the Indigenization Policy in Nigeria. Chapter IV

will focus upon the economic environment which will be

related greatly to the country's infrastructure.

Chapter V will examine entrepreneurship in the country.

Chapter VI will present a summary of the thesis and draw

some conclusions from this study.

CHAPTER II

DEVELOPMENT POLICIES IN NIGERIA

The development policy in Nigeria, like most other

African developing countries, is based on capitalism aided

by governments nationally and internationally.

Pre-Civil War Period

Historically, emphasis throughout the early 1950's

was to develop industry and trade in such a way that

Nigerians themselves could play an increasingly important

economic role in the development process of the country.

It was also everybody's wish that this should be tackled

with vigor and should be done so 'as soon as possible.'

In the mid-1950's, as Nigerians took over increasing

power, the economic policy of the country was modified in

two important ways.2 First, intensifying nationalism

greatly emphasized Nigerian participation, benefits and

control in the development of the modern economy.

Second, as Nigerians recognized that indigenous

business was not yet able to provide the know-how needed

1o. E. Akeredoln-Ale, "Values, Motivations andHistory in the Development of Private IndigenousEntrepreneurship: Lessons from Nigeria' s Experience,1946-1966," Nigerian Journal of Economic and SocialStudies, XIII (July l971)V20.

2 Nigeria, Constitution, 1951, 1954, 1957.

17

18

to generate a substantial modern sector, the government

increasingly assumed a direct and active role in the

productive sector of the economy. By 1955, government

corporations undertook a great number of directly

productive enterprises intended to be run as profitable

ventures. In this manner numerous large-scale national

development activities could be promoted. These corpor-

ations were intended to operate as private enterprises in

order to promote economic development in the exact same

way as would private firms. After these modifications,

Nigeria moved to an economic development policy which was

nationalistic and which possessed state-capitalist and

welfare tendencies. Dr. Charles R. Frank, Jr. described

Nigeria's pattern of industrialization as one involving

"emphasis on private enterprise combined with the use

of national development corporations and other

quasi-governmental bodies," and also as one in which

"private enterprise is encouraged, but the role of

national development corporations are conspicuous."3

These corporations which were engaged in direct

productive activities did not perform as was anticipated.

The policy was considered as a failure due, primarily, to

3 Charles R. Frank, Jr., "Public and PrivateEnterprise in Africa," Government and EconomicDevelopment, edited by GustovRamis (New Haven, 1971), p.96, 90.

19

the political abuse exercised by the corporations, their

low profitability and their limited managerial capability.

As a result, the country placed increasing reliance upon

foreign-owned enterprises for the development of the

modern economy. This amounted to a shift from nationalist

to internationalist policy, causing an absence of

"national control over or at least co-determination of

basic decisions affecting national levels and patterns

of output, consumption, investment and international

trade. . . ."4

Indigenous enterprise, nevertheless, was still

favored for all activities that Nigerians believed to be

capable of performing by themselves. Reliance on

government-owned directly productive enterprises for

further development decreased dramatically. With this

state of affairs, the mixed-economic policy was entirely

forgotten; and welfare tendencies were almost completely

dropped. From 1960 through 1968 which included the First

National Development Plan (1962-1968) was a period of

increased international economic dependency.

4 Reginald H. Green, "The Role of the State as a Agentof Economic and Social Development in the LDC ," Journalof Development Planning (1974), 6.

20

Post-Civil War Period

After the Civil War that lasted from 1967 through

1969, Nigeria initiated joint international/national

capitalism as its basic economic development policy. The

private sector, however, would still be vital in its over-

all development policy.5 There would be an increase in

gross private fixed investment from 48.6 per cent of total

fixed investment in 1970-71 to 60.2 per cent in 1973-74

and this trend was expected to continue.6 Foreign direct

investment was projected at about 50.6 per cent of gross

fixed private investment for the Second Development Plan

period.7 The country relied on foreign enterprises for

the creation of investment opportunities and to establish

their commercial viability. Most medium or large scale

economic activities in the modern sector were initiated by

foreign enterprises together with Nigerian government or

private investment. With the reliance on private inves-

tment, foreign and indigenous, Nigeria created a series of

related approaches and measures to facilitate investment.

The government attempted to minimize uncertainty, which

5 Nigeria, Second Development Plan, 1970-1974 (Lagos,1970), p. 275.

6lbid., p. 48

7lbid., see also Edwin R. Dean, Plan Implementationin Nigeria 1961-1966 (Ibadan, 1972), p. 209.

21

scared away private investment and generated instability.8

The government constantly stressed consultation with

private enterprise. For this reason, the government was

committed to multifaceted programs of assistance to

private enterprise.9 In the Second Development Plan there

was emphasis on "the need to bring various (private),

interested groups into a smooth and harmonious working

relationship with government bodies responsible for

industrial matters.1 0 The government was to set up new

administrative machinery "to ensure regular and adequate

consultation with representatives of the private sector."1 1

Import restrictions during the war period stimulated

new growth in industry. Petroleum production, responding

to sustained new demand, increased more than fourfold

between 1962-1963 and 1966-1967. Despite the war period

interruptions, the Second Development Plan would still

project more than a doubling of oil production by 1973-

1974. In terms of Gross Domestic Product (GDP) oil pro-

duction rose from 2per cent to 5.1 per cent in the four

years from 1963 to 1967 and was expected to skyrocket to

12.5 per cent by 1973-1974. It had been anticipated that

8 Ibid., p. 67.

9lbid., pp. 145-146, 151, 231-233, 236, and 293.

10 Ibid., pp. 145-146.

1llbid., p. 145.

22

exports from the oil sector would contribute almost<

two-thirds of Nigeria's total exports by 1973-1974.12

With the encouraging economic situation, coupled with

the victory in the Civil War, Nigerians gained great

confidence in themselves.

The war helped to generate greater confidence in thestrength and resilience of the Nigerian economy andenhanced its potential credit worthiness abroad. Theorigin of this confidence was ascribed to the overallnatural endowments to the country in the fields of.agriculture, livestock, forestry, fishing, waterresources, mineral oil, solid minerals, fuel andenergy. It derived from the quantity and quality ofits manpower, the innate ability of its people andtheir determination to transform their countrypolitically, economically and socially. The Nigerianeconomy emerged from the war as probably the mostpromising in Tropical Africa.13

The Post-Civil War approach to economic development

showed confidence and purpose previously lacking in the

Nigerian development policies. Since lack of purpose,

particularly in economic matters, had tended to restrain

economic development, the federal government decided to

occupy the commanding position in the quest for purposeful

national development and to provide the leadership and

honest administration that was necessary to

I2 lbid., pp. 50, 52, 65.

13Ibid., p. 29.

achieve a national sense of purpose.1 The government's

intentions could be seen from the following statements

made in the Second Development Plan:

1. a unified, strong and self-reliant nation;

2. a dynamic economy;

3. a just and egalitarian society;

4. a land full of opportunities for all

citizens, and

5. a free and democratic society.15

The spirit of nationalism, a desire to be freed from

dependence upon foreign investors was, nevertheless, still

very strong in the minds of Nigerians. In the Second

Development Plan, it was stated that

experience has shown through history, thatpolitical independence without economic independenceis but an empty shell. . . . The interests of foreignprivate investors in the Nigerian economy cannot beexpected to coincide at all times and in everyrespect with national aspirations. . . . A trulyindependent nation cannot allow its objectives andpriorities to be distorted or frustrated by Remanipulations of powerful foreign investors.

Nigerians' demand for greater "economic independence"

could not be ignored. It was inevitable that "explosive

14Ibid., p. 32.

151bid.

16Ibid., p. 289.

23

24

socio-political problems were no doubt to arise in the

future with foreign-absentee control of the nation's

industrial sector."' 7

Emphasis on income distribution and the welfare of

the people of Nigeria was one of the facets of the

national-capitalism of the post-war period as opposed to

the earlier international/national capitalism. The Second

Development Plan mentioned the need to

reduce the areas of unearned incomes, to broaden thesocial base of the capital ownership in the economy,to reduce the high degree of concentration . . . ofholdings of stocks and shares, and to enableNigerians to share in the increasing profit generatedin the country.18

One of the principal objectives of fiscal policy was to

"minimize existing inequalities in wealth, income and

consumption standards which may tend to undermine

production efficiency, offend a sense of social justice

and endanger political stability."'19

The income and wealth redistribution and other goals

together with the anticipated healthy growth and

development of the economy, were to be attained through

two facets of the post-civil war capitalism: an

17Ibid., p. 144.

8Ibid., p. 75, 71.

19 Ibid., p. 68.

. ._._..

25

intangible change in national spirit and attitude; and a

tangible change in economic policy.

The intangible change was seen as a shift to a

leadership of integrity and dedication to development and

the general welfare from which effective results would

flow. An example mentioned in the Second Development Plan

was that

". .. in stimulating a greater sense of sacrifice in

the community, the government would provide theleadership and honest administration necessary fordevelopment. Honest and dedicated leadership can go 20very far in achieving self-reliant economic advance."

The Second Development Plan constantly stressed the

significance of government led by dedicated people.

On the other hand, the major tangible change

implemented an economic policy that was to shape and, if

possible, control the allocation of investment.

Indicative planning was used to influence "the quantum and

composition of investment undertaken in the private sector

in order to ensure that such investment activities were in

consonance with national objectives and priorities."2 1

The influence was to be obtained mainly through different

investment incentives. Those who were to invest in

20Ibid., pp. 32, 33.

21Ibid., p. 280.

-- 1 .. .f. .er ,,a+.a r_.. ,,.:,:e'i --- _ ,. ,-s *a;.ut ... c.,-«tir _ - +u -NqN

26

priority areas would be favored in the administration of

the incentive programs; for "only carefully selected

industries which meet the requirements of national

priorities will qualify."2 2 Priority status would depend

principally

. . on the value- added potential of proposedindustries . . . . Priority status could not beconferred indiscriminately on broad industry groups,but, rather on those specific industrial activitieswithin each group that . . . [would by] in csonancewith the value-added maximization principle.

Priority status was accorded to "those industries that

were to consolidate the industrial achievements of the

past decade through the provision of intermediate and

capital goods" and those in which "the summation of the

forward and backward linkages" were expected to be high.2 4

In addition, the government mobilized a number of

controls to improve the allocation of investment. The

plan stressed government and indigenous private ownership

in partnership with foreign investors. This time,

however, statements favoring government ownership were

firmer than ever before. The government insisted on at

least 55% ownership in a projected iron and steel complex,

in petrochemical industries, in fertilizer production, and

22Ibid., pp. 144, 279-286.

23Ibid., p. 286-281.

24Ibid.

27

in petroleum products. The government and indigenous

private equity, together, were also to amount to at least

35 per cent in a number of other important industries. 25

Emphasis was placed, throughout the plan, on Nigerian

nationalization, on employment of Nigerians at all levels,

including technical and managerial positions and even

partial ownership of foreign-run companies. 6

The government was not to embark on indiscriminatenationalization of existing future enterprises in thecountry. Where any nationalization . . . [would be]necessary . . . compensation would be made inaccordance with internationally accepted norms ofequity and fair play.2 7

There were still other controls that the government

could use. It intended to require "honest accounting

operations" by large firms, to discourage monopoly, and to

control the repatriation of dividends and capital in order

to encourage further investment in the Nigerian economy.

It had various formal and informal pressures in regards to

matters such as licensing and permissible quotas of

foreign personnel. The government could even withdraw

authority granted for the establishment and operation of a

business and, consequently, force a firm out of the

25 Ibid., pp. 145-146.

26 Ibid., pp. 145-146, 226-227, 230, 233.

27Ibid., p. 289.

28

country forever.2 8 The Second Development Plan period,

1970-1975, could be described as an internationally aided

capitalism with some stress on nationalism. Government

investment programs, under the Third Development Plan that

started in 1975, heavily stressed infrastructure. "The

main thrust of the public sector program under the plan

was the further development of essential infrastructural

facilities . . . In this sense the public and private

sectors are largely complementary."2 9 Government also

complemented private enterprise by providing a business

and economic climate and a set of programs and policies

intended to encourage and assist the "very dynamic"3 0

private sector of the economy. In order to avoid

unsettling ambiguity for foreign investors, the areas

reserved for indigenous enterprise, and those in which

foreign investment was to be accepted, were clearly

defined by law.3 1 "The Plan was prepared in close

consultation with the private sector. . . . This is to

28 Ibid.

29 Lagos Daily Times, August 14, 1975.

3 0 Federal Republic of Nigeria, Third NationalDevelopment Plan, 1975-1980, Vol. I (Lagos7T975T, pp.349, 28-29.

3lIbid., p. 349.

29

ensure that the interest of the private sector is fully

taken into account in the Development Plan." 3 2 In his

speech Chief Henry Fajemirokun said:

If my analysis of current trends and thinking iscorrect, the government is happily becoming more andmore responsible to the constructive suggestionswhich the organized private sector of the economy ispriviledged to make from time to time. For the firsttime, the sector has been deliberately andmeaningfully involved with the development planningprocess and the indications are that it will be evenmore closely associated with the implementationprocess.33

According to the Plan, directly productive investment

remained primarily a private responsibility, although the

Plan also projected substantial public investment in

industrial activities in partnership with foreign

corporations.34 The economic development of Nigeria still

depended very much on the indigenous and foreign private

enterprises. Gowon, in his speech, on March 29, 1975,

said:

32 General Gowon, "Speech on the Third NationalDevelopment Plan," Lagos Daily Times, March 31, 1975,p. 29.

33 Third Plan, p. 7.

34 Chief Henry Fajemirokum, President, Chamber ofCommerce, Lagos Sunday Times, March 9, 1975, p. 7.

r"----.

30

The Third National Development Plan offers to ourindigenous entrepreneurs and to private foreigninvestors a tremendous opportunity to play animportant part in the development of the Nigerianeconomy . . . private investment activity is welcomein most sectors of the economy. . . .35

The Third Development Plan also called for a projected

private investment (of N10 billion) which was more than

triple the actual private investment (N3.1 billion) during

the Second Development Plan.3 6

The government leaned very much toward advancing

indigenous business interests even at the expense of

delaying development, as long as the cost was not hurting

the economy too much. The Plan further emphasized

indigenization as well as business-assistance programs for

Nigerians.

Even with the oil boom in 1974 the government had to

depend once more on foreign corporations for the provision

of technology for directly productive enterprises, e.g.,

liquefied natural gas, petroleum products, fertilizers,

etc. In each of these areas, the government was to be a

major partner. Gowon, in his speech given on the Third

35 Ojeturji Aboyade, "Nigerian Public Enterprise as anOrganizational Dilemma," Public Enterprises in Nigeria:Proceedings of the 1973 Annual Conference of~the NigerianEconomic Society(Iadan, 1974), p.. 34.

36 Gowon, "Speech," p. 29, see also Third Plan,p. 353.

31

Development Plan, made it all the more clear that Nigeria

still needed the foreign investors when he said: "The

foreign businessmen in our midst are as welcome as ever

before. . . ."37

The oil boom created a change in the economic

development approach in the Third Development Plan in

that government investments were increased drastically.

"The size of the Plan is meant to ensure a radical

transformation of the economy during the Plan period." 3 8

The nominal and effective investment programs were

introduced with about N20 billion to N32 billion projected

for them.39 The "nominal" investment program is a simple

summation of all the financial allocations made to all the

projects." The "effective" investment program is more of

an aggregate (macro) economic projection. In terms of

budget allocations it is the more concrete one for

operational purposes. It is the sum total of all the

investment projects incorporated in the Plan, and also the

list of projects that public agencies were committed to

implement.

The Third Development Plan was more comprehensive and

extensive than the first two plans. The operational

37 Third Plan, p. 10.

38 Gowon, "Speech," p. 29.

39Third Plan, p. 8.

32

(nominal) Third Plan program was more than nine times as

large as the upward revised investment program (N3.35

billion) for five years of the Second Plan period. The

guidelines of the Third Plan set a very great public

investment target of N4.3 billion which was thought to be

over optimistic and very unlikely to be met.4 0

Nevertheless, a year later, the Third Plan presented an

operational investment program nearly eight times as large

as that of the guidelines.

The Third Plan was further modified creating a

greatly enhanced relative role for public investment.

Formerly in the Third Plan, the private sector was to be

the major source of capital formation. Private investment

was projected to be N6.4 million.4 1 This exceeded the

private investment of the Second Plan period by about 60

per cent. The projected Second Plan investment was 51 per

cent private and 49 per cent public; whereas, the actual

investment was 58.4 per cent private and 41.6 per cent

public.42

The oil boom made it possible for the government to

meet its long-standing intention to share with foreign

investors in the ownership of nationally important

4 0Ibid., p. 395.

4 1 Lagos Daily Times, December 7, 1974, p. 25.

4 2 Guidelines, The Third Plan, p. 8.

33

projects. Since the Second Plan, emphasis on government

and indigenous private partnership with foreign investors

had gradually increased. With the availability of ample

oil funds, progress in government negotiations with

foreign firms became more definite and the prospects of

government participation on a wide-scale basis became

feasible. Those firms that shared ownership with the

government were generally to operate as any other

profit-oriented private firms.

With the available funds brought about by, the oil, boom,

provisions for welfare programs became increasingly

important. Health facilities, education, housing and

water supplies were emphasized as sectors that directly

affect the welfare of the ordinary citizen of Nigeria.

"The aim is that by the end of the Plan period every

Nigerian should experience a definite improvement in his

overall welfare." 4 3 One of the most important policy

decisions of the Plan is "the introduction of free

universal and compulsory primary education. . . . Primary

education was to be free throughout Nigeria from

4 3The Third Plan, p. 10.

34

September 1976 and was to be compulsory from 1979."14

Still another very important objective was the reduction

of unemployment.4 5

In practice the economic development policy of the

Third Plan was a mix of national and internationally aided

capitalism. There was almost equal emphasis on both

national and international participation in development

during the Third Development period.

44The Third Plan, p. 8.

45The Third Plan, pp. 27, 29.

CHAPTER III

INDIGENIZATION POLICY IN NIGERIA

Why Indigenization?

Although Nigeria achieved independence in 1960, by

1970, the leaders felt that economically they were not yet

independent. The modern sector of their economy was still

owned and managed by foreign expatriates. They felt that

without indigenization, they could hardly extricate

themselves from overseas colonial domination. For this

reason, they anxiously wanted control of the foreign-owned

and managed business. In order to achieve this goal, the

Indigenization Decree was initiated to eliminate

foreigners from certain economic fields to be controlled

by indigenous Nigerians.

The idea of indigenization was supported heartily by

the Nigerian press. Journalists and educators wrote about

and discussed it extensively and in a positive manner.

Newspapers, such as the Nigerian Observer, New Nigerian,

Daily Times, Sunday Observer, Nigerian Herald, Nigerian

Tribune, Morning Post, Business Times, etc., published

widely on the benefits of indigenization to Nigeria.

Numerous discussion on indigenization were printed in the

dailies which showed how preoccupied the public was with

the subject.

35

36

The economic aspects of sovereignty was expressed by

one journalist when he mentioned that the foreign business

community in Nigeria was like "a rotting tooth resting

comfortably in the nation's mouth." 1 He continued to say

that such a tooth must be extracted; meaning that sweeping

indigenization was very necessary. No country, he

continued, can escape the process of indigenization, for

it is a necessary step in the nation's evolution. After

all, the indigenization problem in Nigeria was a manifes-

tation of the yearning of Nigerians to control the eco-

nomic destiny of their country in theory and in fact.2

Osa-hemi Uzumere argued that it was better to mismanage

their own economy than for foreigners to do so for them.3

Dr. C. Ebo argued that the aims of indigenization "are

excellent and indispensable," and that Nigeria must con-

trol the ". . . bulk of its economic life . . . , if not,

political independence remains dubious." 4 In a lecture

'"Scrap Indigenization Decree If . . .," NigerianObserver (February 1974), pp. 1-2.

20. Akarrogun, "What Indigenization Is All About,"Sunday Observer (March 24, 1974).

3 A. Osahemi Uzamere, "What Happened to Our BusinessTake-Over," Nigerian Herald (April 24, 1974), p. 5.

4 C Ebo, "Foreign Financed Cos. Should HelpIndigenization," Morning Post, July 1971, p. 8.

37

at the Amadu Bello University, General Adebayo emphasized

the need to liberate the nation's economy from foreign

domination.5

The Nigerian indigenous business community also

favored sweeping indigenization, with the assumption that

indigenization would expand the private sector. The

Organization of Nigerian Indigenous Businessmen (ONIB),

founded in August 1970, with 500 members, held its General

Economic Conference early in 1971, urging sweeping

localizatin of all retail and distributive businesses in

the country,6 and also urged the military government to

pass the indigenization legislation at once.7 Chief

Fajemirokum, emphasized that a greater part of the

Nigerian economy is still dominated by foreigners whose

interests tend to diverge from the national interest.8

He further pleaded with the military government "to insure

that Nigerians occupy the commanding heights in the

5New Nigeria, March 24, 1972.

6 "Nigerian Indigenous Businessmen," Sunday Post,

June 20, 1971, p. 13.

7Daily Times, September 1, 1971.

8H. Fajemirokum, "Indigenous Concerns and Second

Development Plan," Nigerian Tribune, April 22, 1971, p. 5.

38

control of their economy and their national development."9

Indigenization in Nigeria was also caused by the pressure

put on the government by educated young men and women who

after graduation from universities often found out that

opportunities in the private sector of their country were

limited because the best jobs were held by foreigners.

It's as the saying goes, "you graduate from these

universities only to become a labourer in your own

country." In some cases where they could not find

suitable jobs, they simply left and settled overseas. For

example, in 1975, 4,000 Nigerians lived in New York City

alone. 1 This, of course, was a brain drain of talent

which Nigeria needs badly for the economic development of

that country.

Chief S. 0. Adebo stressed that Nigeria's decolo-

nization "involves not only the taking over of the

political government of the country, the Civil Service,

and the management of public boards, and corporations,

but also the indigenization of the private sector of the

economy. Economic decolonization is the last and the

9 "The Government and Indigenous Entrepreneurs,"Nigerian Observer, April 17, 1973.

1 0The Bethlehem Globe-Times, December 6, 1975, p. 30.

39

toughest task of all."" Professor Pita N. Ejiofor, an

economist, also felt that indigenization was the best for

Nigeria, in order to take her economic destiny into her

own hands.1 2 The former chairman of the influential Daily

Times Group companies, Mr. B. Jose, also argued that "the

raison d'etre of the indigenization scheme introduced by

the federal government is to give economic power to

Nigerians." 1 3 P. R. Belabo also argued that the only way

to reverse the domination of Nigeria's economy by aliens

was through indigenization.1 4

At the 1975 indigenization conference, A. Y. Oyeleke

said that:

It is common knowledge, reinforced by the experienceof the former colonized territories all over theworld, that while political self-determination isphilosophically desirable as the inalienable rightand ultimate goal of any country under a foreign

11S. . Adebo, "Keynote Address," ManagementDevelopment in Nigeria: The Challenge of Idigenizationedited by U.~Udo Aka, H. ATle, M. Kayoe TIbadan,977)p. 14.

12 P.N. Ejiofor, "Mobilizing Capital forIndigenization," The Nigerian Journal of Public AffairsIII (1972), p. 27. ~~

13B. Jose, "The Role of the Information Media in theIndigenization Scheme," Management Development inNi eria: The Challenge of Indigenization, edited~by U.

o Aka, H. Alile, M. Kayde (Ibadan, 1977), p. 30.P. R. V. Belabo, "Promotion of Indigenization in

Nigerian Business," The Nigerian Journal of PublicAffairs, III (1972), p.-24.~

I'M I III I'll -1

40

rule, what is needed to make it meaningful, and totranslate available resources into nationalprosperity is a firm economic base backed by 5 theresourcefullness and ability of the people.

Dr. Chikelu, Permanent Secretary in the Federal Ministry

of Economic Development, also argued that consolidation of

political independence called for economic emancipation of

the young countries of Africa. He also felt that the

indigenization process of increasing local involvement in

the ownership, control and management of the enterprises

within the countries concerned, was an indispensable part

of the development process.16 Nigerians felt that large

foreign investments were going to mean higher and higher

remittances of profits to the overseas investors, so they

argued that foreign capitalists exploited Nigeria at will

and that it was high time they put a stop to it.1 7 Some

people even termed the 1972 Indigenization Decree the

Magna Charta of Nigeria. Other arguments stated that the

former colonial powers were keeping the new African

countries under their economic control through "unfair

exchange" practices; they bought African raw materials

15A. Y. Oyeleke, "Managing Finance in IndigenizedBusiness," Management in Nigeria, II (July 1975), p. 21.

16G. P. 0. Chikelu, "Aims and Objectives of theIndigenization Scheme," Management in Nigeria (September1976), p. 21.

170. Oin J. B. Onimode, Economic Development ofNigeria: The Socialist Alternative (Ibadan 1975)~

41

cheaply and sold their manufactured goods very

expensively.18 It has been argued that because of this

and other such practices, the industrialized countries

have virtually hurt the African economies and have, as

such, left them underdeveloped.1 9

Neo-colonialism, according to the late head of State

of Ghana, Kwame Nkrumah, meant that any new African coun-

try, even though independent, was indeed, controlled from

overseas, be it from Washington, London, or Paris.2 0 He

continued to say that neo-colonialism maneuvers men and

governments, creating what he termed client states and

despite nominal independence, the former colonial masters

sought to thwart and corrupt true independence. 21 The

fear of the multinational corporations in Nigeria was

expressed clearly by Professor Pita N. I. Ejiofor of the

University of Nigeria, who claimed that in the oil-rich

18 P. Jalee, The Pillage of the Third World (New York,1968, p. 115.

l9. Amin, Neo-Colonialism in West Africa (1973)p. 11. ~

20 K. Nkrumah, Neo-Colonialism: The Last Stage ofImperialism (New York,7T966T, p. xii.

21K. Nkrumah, Consciencism: Philosophy and Ideologyfor Decolonization andDevelopment with ParticuiarRe erence to the African Revoution LonJonT1964), p.

42

land of Nigeria, the multinationals bribe, cajole,

flatter, subvert and otherwise exploit the people. 22

He further claimed that countries in whose territories

subsidiaries of multinationals operate are not in complete

control of their political, not to mention economic,

destiny. He also felt that multinational corporations

created convenient cover for the operation of foreign

informants and spies who were all detrimental to Nigeria. 23

He further argued that the loyalty of Nigerian employees

of the multinationals were always divided between their

government and that of the foreign employers who paid

higher than average wages and salaries. The best Nigerian

brains were often working primarily for the expatriate

employers and not for the best interests of their own

country. It was further argued that indigenization would

benefit Nigeria's balance-of-payments because it would

considerably reduce the amount of profits remitted

overseas as it was common among Nigerians to retain

profits at home.2 4 It was said that since the indigenous

business coummunity of Nigeria did not directly transfer

P. N. 0). Ejifor, "Multinational Corps as Agents ofImperialism," The Indigenes for National Development,edited by B. O. Onibouoje,KoTe Omotoso, O. A. Lawal(Ibadan, 1976), p. 13.

23 Ibid., pp. 17, 20-21.

24 Second National Development Plan, 1970-1974, p. 35.

43

profits abroad, except for the purchase of imported goods,

indigenization would ease the demand for convertible

foreign exchange.

The Nigerian Civil War of 1967-1970 was also a very

important factor for the indigenization policy in

Nigeria.25 The military government felt that the former

"open economy" policy had become obsolete and that

"indigenization, at least in theory, represented a counter

thesis . . . to the former economic policy." 2 6 It was

discovered that the nation's farmers not only could feed

the population and supply the armed forces, but also

provide agricultural staples for exports, which in turn

earned desperately needed convertible foreign exchange.

Wartime conditions reasonably reduced unemployment in the

country. The scarcity of other goods during this time

also created opportunities for indigenous Nigerians to

open up and expand their businesses; idle resources were

utilized to the fullest, new industries were built, and

P. Collins, "The Policy of Indigenization: AnOverall View," The Quarterly Journal of Administration,IX (1975), p. 41.

260. F. Onoge, "The Indigenization Decree andEconomic Independence: Another Case of BourgeoisUtopianism," Nigeria's Indigenization Policy, Proceedingsof the NovemberT974VSymposium (Ibadan,7T975T, p. 57.

_ _ .tea,. .ru - a: '; iw6k*a_-. :.. _. ., -- ' -

44

the growth of indigenous entrepreneurship was stimulated a

great deal.2 7 Import substitutes were manufactured at

home since they could no longer be imported. Nigerian

businessmen commented that although the most part of the

modern sector was owned and managed by foreigners, the

civil war stimulated a "spirit of self-reliance."2 8 With

this, Nigerians realized that indigenization was very

important for the national interest. It was also

discovered, that even during the war, foreigners continued

to control about 95 per cent of Nigeria's large-scale and

82 per cent of the medium-scale industries. When the war

was over, and the wartime indigenous entrepreneurs feared

that they might no longer be capable of competing with the

experienced aliens, they fought hard for a greater share

in the economic life of the country. This led directly to

the Indigenization Decree of 1972.29

Indigenization policies in other African countries,

like Ghana, Kenya and Uganda, for example, also played an

important part in shaping the indigenization policy of

Nigeria. In fact, the Nigeria Enterprise Promotion Decree

27A. A. Ayida, The Economic Consequences of theNigerian Civil War (Lagos, 1970) , p. 8.

28 Chief H. Fajemirokum, "Indigenous Concerns andSecond Development Plan, Nigerian Tribune, Arpil 22, 1971,p. 5.

29 I. S. Aluko, "Nigeria Toying with Nationalization,"Africa, X (1972), p. 52.

, T

45

of 1972 seemed to have been modeled after the Ghanian

Business (Promotion) Act of 1970, which prescribed that

certain expatriate businesses were required to be sold to

Ghanians within a certain limited time. It also stated in

the act that as of August 1, 1970, the Indian, Syrian and

Lebanese non-citizen owners of certain businesses and

industries had to sell out to Ghanians. 30

In Uganda a Special Report stated that ". .Uganda's commerce and industry is predominantly inthe hands of non-Africans most of whom arenon-citizens. This fact also accounts for thenonindigenous character and appearance of our townsand trading centers, which to a first visitor to thecountry would look like a transplanted Bombay,Calcutta or Madras, except that they would perhaps betidier and less populated.3 '

The report further states that "if this imbalance is

not corrected before it is too late, a serious social and

political situation might develop from which it will be

very difficult for the country to extricate itself."32

For this reason a Trade Licensing Act was passed to

exclude non-citizens from carrying on business in certain

specified areas of economic activities in the country. As

a result of this act General Idi Amin, who by 1972, was

30 Ghanian Business (Promotion) Act, 1970.

31Uganda Report on the Committee on Africanization ofCommerce and Iustry~TnTUganda(EnTebe~, 68), p. 3.

3 2 Ibid., p. 10.

46

the new Head of State of Uganda, ordered some 401,000

Asians, essentially Indians and Pakinstani's, to leave the

country within three months. These people played very

important roles in the country, e.g. as businessmen and

teachers. Amin believed that Africa should be strictly

for Africans and that it was high time that Africans

handled their own economic affairs. 3 3

Kenya, a neighbor of Uganda, also had thousands of

Asians living in the country. They were the foreigners

who owned businesses on the main streets and property in

the industrial areas. The President, Tom Mboya, felt that

this characteristic of the Kenyan economy had to be

eliminated.3 4 In 1965 the Kenyan government initiated a

policy of indigenization designed to eliminate Asians from

trade and commerce in the country.35 Since nothing in

particular has been mentioned about the Asians in Nigeria

during the Nigerian indigenization process, it seems

reasonable to believe that they were treated like

foreigners.

33 "Uganda's President Weist Asiaten ans," Die Zeit,August 15, 1972.

34 T. Mboya, The Challenge of Nationhood: ACollection of Speeches and WritTngs, London, 1970,p. 88.

35 Kenyanization of Personnel in the Private Sector:A Statement in GovernmenFt PoliyReat to theE employment o~Non-Citizens Kenya NairoBT (Republic ofKenya , 967T;Tp.TF-4.

: S,.b-*.,,, ,. .;.. :.. ~ .i'.:,..k a..:. .,.,, .n :::.:. . .,fix.. . .. :. :_ -_ ab ia6' +3r, s::. ,, ., ,., 3..., aa . . .m. tt . .M- -

47

Nigerians felt that indigenization was above all,

going to redistribute equity shares from expatriate to

indigenous Nigerians without thinking carefully about the

concentration of wealth that this could cause.36 This, as

will be discussed below, became a very important issue in

the 1977 Indigenization Decree.

While indigenization was important to the Nigerian

people, some of them stressed the difficulties, pointing

out the weaknesses of the economy, the lack of managerial

manpower, and urged the country not to expect any miracles

from indigenization.37 It was felt that short-comings of

the Nigerian commercial elite, such as expensive taste,

lavish life style, contemptuous and deplorable treatment

of their staff, were unlikely to make indigenization

policy a quick success.3 8 Chief Fajemirokum felt that

there was an unwillingness among Nigerian businessmen to

give adequate supervision and make proper use of written

records, a disinterest in quality improvements and innova-

tions in general, a lack of trust in partners and

3 6A. Owosehum and M. Otigba, The Nigerian EnterprisesPromotion Decree: Impact in Indigenous OwnershipandDistribufionofTEquity Shares (November 1976T, p. 3

3 7Dr. A. Adeleji, "Indigenization: Why Government IsCautious, Daily Sketch, March 11, 1974.

38C. Ebo, "Foreign Finance Companies Should HelpIndigenization," Morning Post, July 1971, p. 8.

48

responsible subordinates, and a love of engaging in

conspicuous consumption. 3 9 He further mentioned that

Nigerian businessmen have a tendency to misuse loan funds

and not to separate business from household expenditures.

Mr. Onyendor in the Renaissance argued that Nigerian

businesmen are prone to failure because of the ineffi-

ciency, which to a greater extent stems from lack of a

clear-cut objective, and poor planning. A Nigerian

businessman tends to rely on inexpensive and inexperienced

labor, and also prefers to operate on the basis of a

high-profit, low-volume theory.4 Mr. Ebo in the Morning

Post asked if it were prudent to entrust such a large

segment of the Nigerian economy to indigenous firms as

early as indigenization called for, when they were "all

weaklings in terms of managerial experience and in

know-how they are all infants," while in effective

3 9 Chief H. Fajemirokum, "Indigenous Concerns andSecond Plan, Nigerian Tribune, April 22, 1971, p. 5.

4 0 H. Fejemirokum, "Nigerian Graduates and theIndigenous Businesses," Nigerian Tribune, March 7, 1974,p. 9.

4 1 N. Onyendor, "Indigenization Scheme: How PreparedAre We?" The Renaissance, January 14, 1974, p. 10.

49

organization, they have not even cut their upper teeth.4 2

All this explains the fear that rapid indigenization could

bring about business failures and dislocations in several

sectors of the economy.

Nevertheless, the reaction of the Nigerian public

opinion makers, civil servants and military leaders did

everything possible for the Indigenization Decree to be

passed.4 3 The press worked very hard to maintain the

deadline of the Decree.44

Indigenization Decree of 1972

The Main Features of the Decree

The Indigenization Decree of 1972, also known as the

Nigerian Enterprise Promotion Decree, was signed on

February 23, 1972, by General Yakubu Gowon who was then

the head of state. The Decree was to take effect on March

31, 1974.

The Decree was made up of two schedules. The first

schedule contained a list of twenty-two service and

industrial activities which were exclusively reserved for

C. Ebo, "Foreign Financed Cos. Should Help

Indigenization," Morning Post, July 7, 1971, p. 8.

43 E. Essien, "Indigenization Scheme: The Slow Rateof Its Operation," Daily Times, November 15, 1973, p. 7.

4 4 "Indigenization: Zero Hour to Amen or Not?" DailyExpress, March 16, 1974.

50

Nigerians or associations of Nigerians while the second

schedule listed thirty-three commercial and industrial

activities which were also reserved for Nigerian citizens,

but which could be undertaken by foreigners under certain

conditions. One half of the Schedule One activities

belongs to the service sector, while the other half

belongs to the industrial sector. The service sector

contained the following activities:

1. Advertising and public relations agencies.

2. All aspects of pool betting and lotteries.

3. Casinos and gaming centers.

4. Cinemas and other places of entertainment.

5. Clearing and forwarding agencies.

6. Hairdressing.

7. Haulage of goods by road.

8. Laundry and dry-cleaning.

9. Municipal bus services and taxis.

10. Radio and television broadcasting.

11. Retail trade with the exception of department

stores and supermarkets.

The other half of the schedule also contained the

following industrial activities.

1. Rice milling.

2. Bread and cake making.

__,. ,:

51

3. Blending and bottling of alcoholic drinks.

4. Singlet (underwear) manufacture.

5. Ordinary garment manufacture (not combined with

production of textile materials).

6. Newspaper printing and publishing.

7. Candle manufacture.

8. Tire retreading.

9. Blocks, bricks and ordinary tiles manufactured

for building and construction.

10. Assembly of radios and radiograms, record

changers, television sets, tape recorders, and

other electrical domestic appliances separated

from the manufacture of components.

11. Manufacture of jewelry and related articles.

Foreigners were to be excluded from these last eleven

industrial activities within two years.

Schedule Two, which contained thirty-three industrial

and commercial activities, did not permit the

establishment of any alien enterprise on and after the

commencement date of the Decree. However, a foreigner

could qualify to operate a business if the paid-up share

of capital of any such enterprise was not more than

400,000 naira or the turnover of the enterprise did not

exceed 1,000,000 naira; but an alien could also qualify to

undertake a business in Nigeria if the paid-up share

52

capital of the enterprise exceeded 400,000 naira or the

turnover exceeded 1,000,000 naira (whichever was

appropriate and applicable), where the equity

participation of Nigerian citizens or associations of

Nigeria in the enterprise was less than 40%.45

Eleven of the thirty-three Schedule Two industries

listed as services were as follows:

1. Coastal and inland waterways shipping.

2. Construction.

3. Department stores and supermarkets.

4. Distribution agencies for machines and technical

equipment.

5. Distribution and servicing of motor vehicles,

tractors, and spare parts, thereof or other

similar objects.

6. Real estate agency

7. Internal air transport (scheduled and chartered)

services.

8. Passenger bus service (interstate).

9. Shipping.

10. Travel agencies.

11. Wholesale distribution.

4 5Nigerian Enterprises Promotion Decree,pp. A12-A14.

53

The rest of the industries in the Schedule Two were

in the industrial sector and were as follows:

1. Slaughtering, storage, distribution and

processing of meat.

2. Fish and shrimp trawling and processing.

3. Beer brewing.

4. Bottling of soft drinks.

5. Manufacture of cement.

6. Manufacture of metal containers.

7. Manufacture of wire, nails, washers, bolts,

nuts, rivets, and other similar articles.

8. Boat building.

9. Manufacture of bicycles.

10. Screen printing on cloth, dying.

11. Manufacture of suitcases, briefcases, handbags,

purses, wallets, portfolios and shopping bags.

12. Production of sawn timber, plywood, veneers and

other wood conversion industries.

13. Furniture making.

14. Paper conversion industries.

15. Printing of books.

16. Insecticides, pesticides and fungicides.

17. Manufacture of paints, varnishes or other

similar articles.

18. Cosmetics and perfumery manufacture.

19. Manufacture of soaps and detergents.

54

20. Manufacture of matches.

21. Bicycle and motorcycle tire manufacture.

22. And others.4 6

Implementation of Decree

As the principal agency for implementing the Decree,

the Nigerian Enterprises Promotion Board (NEPB) was set up

by the Indigenization Decree of 1972. The Chairman of the

Board was then serving as Permanent Secretary of the

Federal Ministry of Industries. The rest of the members

of the board were representatives, each from the Federal

Ministry of Industries, Ministries of Trade, Finance,

Economic Development and Reconstruction, and Internal

Affairs; and three other representatives from the New

Nigerian Development Company (NNDC), the Nigerian

Industrial Development Bank (NIDB), and the Western

Nigerian Industrial, Investment, and Credit Corporation

(WNIICC).4

The most important section of the NEPB was in the

Secretariat which was in Lagos. It was made up of:

(1) the administrative unit, (2) the inspectorate

46 "Nigerian Enterprises Promotion Decree 1972,"Activities Schedules, pp. 15A-19A.

4 7 "Nigerian Enterprises Promotion Decree 1972,"Supplementary Official Gazette Extraordinary, VIX,February 1972, p. A-12.

55

unit, and (3) the valuation unit.48 The inspectorate was

charged with reminding expatriate firms of their

obligation to indigenize. By the Decree, expatriate firms

could seek exemption from any of its provisions by

application to the commissioner of industries.4 9

Practically, firms could apply and get an extension of two

consecutive six-month periods of exemption. The valuation

unit, staffed with accountants, engineers, land officers

and lawyers, furnished the Nigerian indigenous businessmen

with valuable ideas about the status, value, financial

position and profit earnings power of the firms to be

indigenized. If an expatriate firm failed to comply with

the Decree after March 31, 1974, the NEPB had the

authority to levy fines and dispose of the defaulter's

property. They, however, lacked the power to seal up

defaulting enterprises.

V. I. Bello, "The Intentions, ImplementationProcess and Probs of the Nigerian Enterprises PromotionsDecree, CXXXIV (1972), in Nigeria's Indigenization Policy:Proceedings of the November 1974 Symposium (IbadanT975),

4 9 Nigerian Enterprises Promotion Decree, Paragraph 9.

50 Federal Representatives of Nigeria, FederalMilitary Government's View on the Industrial EnterprisesPaneT, Lagos, 1976, p.-4. ~~

56

The 1972 Indigenization Decree set up twelve

Nigerian Enterprises Promotion Committees to assist the

NEPB in Lagos to carry out its intent at the state level.

These committees were located in Benin City, Port

Harcourt, Kaduna, Ibadan, Ilorin, Enugu, Maiduguri,

Sokoto, Calabar, Kano, Ikeja and Jos.5 1 The chairmen of

these committees were required to monitor compliance by

the expatriate business community, recommend to the Lagos

office for better implementation of the Decree, and

perform other services required of them by the NEPB.

During the November 1974 Symposium on Nigeria's

Indigenization Policy, A. E. Ekukinam, then the President

of the Nigerian Economic Society, felt that since 1972,

implementation of the Decree went smoothly. Of 326 firms

on Schedule One, 237 were supposed to have complied and

sold out to Nigerians; and of the 628 businesses on

Schedule Two, about 503 had complied. This meant that 740

firms, or 77.57, had been indigenized. In addition the

Nigerian Bank for Commerce and Industry was set up in 1973

to assist the commercial banks and to provide the funds to

purchase the expatriate firms.5 2

5 1How to Buy a Business Under the IndigenizationDecree o"F17727(Lagos, 1974T, pp. 46-4T8.

52A. E. Ekukinam, "Opening Address," Nigeria'sIndigenization Policy Proceedings of the November 1974Symposium (Ibadan, 1975), p. 2.

57

Although there was high optimism from the beginning, it

became certain by mid-1975 that large scale noncompliance

by expatriate firms existed. Richard Ikiebe in the Daily

Times of Lagos reported that "a good number of these

over-optimistic Nigerians had concluded that the 1972 law

was after all the greatest mockery of a Decree." 5 3 A.

Oyebode in the Lagoon Echo paper called the March 31, 1974

deadline All Fool's Day. 5 4

In order to investigate this matter, General

Murtala's government, which succeeded that of General

Gowon, organized a series of panels to investigate a

broad range of Nigeria's social and economic problems.

Their purpose was to recommend necessary reforms.

The Industrial Enterprise Panel's White Paper Report,

discovered the various devices used in circumventing

the provisions of the Decree and admitted that its

implementation as of mid-1975 "fell short of

5 3 A. Oyebode, "From Our Archives: IndigenizationRevisited," Lagoon Echo, Special Edition, Lagos, July1976, p. 10.

54R. Ikiebe, "Indigenization Decree: An Appraisal,"Daily Times, November 18, 1978, p. 7.

58

expectations."55 Confirmed cases of compliance after

proper inspection was only 33 per cent as of June 30,

1975. 56

Causes of the Massive Noncompliance of

the 1972 Indigenization Decree

The Industrial Enterprise Panel Report indicated that

many factors were responsible for noncompliance. The

report stated that "the main devices employed to circum-

vent the provisions of the Decree included fronting appli-

cation for nationalization, extended use of the definition

of Nigerian citizenship, interpretational problems of

classification of enterprises, the gentle approach to

implementation of the Decree and frequent amendments

providing for exemptions on flimsy grounds. In almost all

instances, the devices employed by the foreigners could

not have worked without the active support and compliance

of some misguided Nigerian citizens. Defects in the

Decree itself also contributed to the failure of the

indigenization exercise. For example:

55 Federal Representative of Nigeria, Federal militarygovernment's view on the Report of the IndustrialEnterprises Panel (Lagos, 1976),~p.4

56 J. 0. Samisi, "Reflections on the IndigenizationExercise," Speech delivered at the March Quarterly Dinnerof the Institute of Chartered Accounts of Nigeria on April6, 1979, p. 3.

59

1. The lack of power for NEPB to seal up defaulting

enterprises;

2. Failure to make it obligatory for more companies

to seek compliance by issuing their shares

through the Lagos Stock Exchange.

3. Failure to match equity participation with

management control.

4. Weak and understaffed administrative machinery

for implementation of the Decree.5 7

When the Federal Military Governement noticed the

problems it faced with the implementation of the Decree,

the government stressed the need for administrative

revamping of the Nigerian Enterprises Promotion Board

itself. The Panel then recommended that the NEPB should

have the authority to seal up defaulting businesses, seize

them, appoint caretaker managers and try to sell them to

faithful indigenous Nigerians. The Panel also recommended

that the names of defaulting businesses were to be

published in all national newspapers and many Nigerians

should be invited to be potential buyers of those firms.

Defaulting enterprises were to be denied the right to

repatriate money overseas. Defaulting expatriates were to

be deprived of the right to stay in Nigeria.

57 White Paper, p. 4.

60

Fronting was one thing that the Panel recommended

strongly to come to an end. Fronting was done by

regrouping existing expatriate businesses into different

legal entities, selling shares to Nigerians on the basis

of future dividends (this never involved any exchange of

money for shares) and in most cases, there were transfers

of shares to Nigerians without any direct involvement

of the management of the business that was to be

indigenized.5 8 Fronting was so successful because some

misguided Nigerians actively supported the expatriate in

the process of noncompliance of the Decree.5 9

The 1972 Indigenization Decree unintentionally

created "the concentration of economic power in the hands

of a few Nigerian's."60 As a result, the Industrial

Enterprises Panel Report suggested some major steps to

reverse excessive concentration of economic power during

the 1977 Indigenization Decree. In Paragraph 58, for

example, it was mentioned, besides other things, that 10

per cent of the shares in the affected expatriate

enterprises should be sold to the employees of the firm.

58Ibid.,p. 5-6.

59 G. P. 0. Chikelu, "Aims and Objectives of theIndigenization Symposium," Management (September 1976),p. 24.

60 A. Oyebode and L. Abass, "From our Archives:Indigenization Revisited," Lagom Echo, Special Edition,July 1976, p. 10.

61

On June 29, 1976, in his address to the nation, Lt.

General Obassanjo formally acknowledged that the

indigenization policy had very poor results. He further

revealed that the Industrial Enterprises Panel found that

"out of a total of about 950 affected enterprises, only

314 or 33 per cent were confirmed as having fully complied

with the provisions of the Decree by June 30, 1975."61

These poor results, no doubt, prompted the launching of

the 1977 Indigenization Decree.

The Indigenization Decree of 1977

It was during the last minute preparations for the

Second World Black and African Festival of Arts and

Culture, FESTAC, when the Nigerian government promulgated

the new Indigenization Decree of January 12, 1977.62

The Main Features of the Decree

In 1977 the Indigenization Decree touched all

activities carried on in Nigeria, and no foreign firm was

exempted from it, unlike the 1972 Indigenization Decree.

It was made up of three schedules. The first schedule

listed economic fields reserved exclusively for Nigerians;

Schedule Two contained a list of enterprises, 60 per cent

61 New Nigerian, July 16, 1976.62 "Indigenization: A Few Surprises," Business

Times, January 18, 1977.

62

of whose equity were to be owned by indigenous Nigerians,

while Schedule Three listed enterprises which had to have

not less than 40 per cent indigenous equity participation.

The compliance day of alien firms was set for Dcember 31,

1978.63

The 1977 Schedule One listed forty economic

activities; Schedule Two contained fifty-seven different

fields of economic activities, while the newly created

Schedule Three selected thirty-eight economic activities

together with those that were neither in Schedule One, nor

Schedule Two, which were not, however, within the public

sector.64 The Decree ruled, according to Paragraph Four,

that all enterprises specified in Schedule One were

exclusively reserved for Nigerians or Nigerian

associations, and, after the appointed day, only a

Nigerian or Nigerian association, should be part or sole

owner of any such enterprise. It further stated that, no

such enterprise should be established by any foreigner on

or after the commencement date of the Decree.

The new 1977 Schedule Three listed thirty-eight

specific industrial areas that included the following:

63 Nigerian Enterprises Promotion Board, October 1979,p. 1.

64 Nigerian Enterprises Promotion Board, NigerianEnterprises Promotion Decree, 1977 (Lagos, July77T,p. 8-.

. ;

63

glass and glassware, basic chemicals, drugs and medicines,

the manufacture of tobacco, cutlery, fabrication metal

products, general hardware, plastics, engines and

turbines, machine-making, agricultural machinery,

television and communication equipment, radios, railway

equipment, electrical appliances, shipbuilding and

repairs, watches and clocks, photographic and optical

goods, manufacture of aircraft, scientific instruments,

textile manufacturing industries, hotels, data processing

and ocean transporting/shipping. This schedule contains

the most important economic activities which could be

regarded as the backbone of any industrial sector of a

nation.65

In order to reduce the inequality of income problems

created by the 1972 Decrees, wherein very few informed

people had the opportunity to buy shares of the

selling-out expatriate firms, the Industrial Enterprises

Panel suggested that if less than ten persons acquire 40

per cent of the stock of an expatriate firm in Schedule

Two without direct management involvement, any such

transaction should be "revoked" and "enterprise directed

to seek quotation through Lagos Stock Exchange." All

65E. Okoluwa, "Indigenization, Freedom and Economic

Policy," Daily Sketch, March 31, 1977, pp. 12-13.

64

gift-type transfers or payment for shares acquired from

future dividends were also to be declared null and void.

Paragraph 58 of the White Paper stated that "Enterprises

which are being sold to owner-managers may be acquired

alone by the owner-manager, provided that he shall devote

full time to the enterprise during the first five year

period. All others shall be sold on the basis of 5 per

cent maximum equity or N50,000 worth per beneficial owner,

whichever is higher in value." 6 6 According to the new

Decree, all Schedule Two and Three firms were compelled to

sell not less than 10 per cent of their equity shares to

their workers.67 It further stated that no less than

one-half of the 10 per cent should be sold to workers of

the lower echelon. To further ameliorate the inequality

of income problem caused by the 1972 Indigenization

Decree, the new 1977 Decree created an agency which they

called the Allotment Committee. It was to operate under

the Capital Issues Commission.6 8 This new committee

consisted of three representatives:

6 6 The White Paper, Paragraph 58, 1977.

6 7Nigerian Enterprises Promotion Decree, 1977,Section 11, () (d).

6 8 lndigenization Decree, Section 11 (1).

- - - .

65

1. A representative of the Nigerian Enterprises

Promotion Board;

2. A representative of the Nigerain Stock Exchange,

and

3. A representative of the appropriate issuing

house.69

The functions of the Committee were, however, never

spelled out in detail.

The Nigerian Enterprises Promotion Board

under the 1977 Indigenization Decree

The new Decree strengthened the Nigerian Enterprise

Promotion Board. For Example, it stressed solidifying the

institutional framework of the principal implementing

agency. The new NEPB consisted of twelve members, with

five of them to come from the private sector. The Board's

first full time Chairman was Malam Ali-Hakim, an

economist, a graduate of the Ahmada Bello University in

Zaria. 70

The new NEPB had the authority to deal with offenders

as was stipulated by Paragraph 17 which read:

6 9 Ibid., Section 9 (5).

70 "Enterprises Promotion Board Formed," New Nigerian,February 1, 1977.

66

Any person who:

(a) acts as a front or purpose for the purpose ofdefeating or in any manner likely to defeat theobjective of this Decree to be the owner or partowner of any enterprise; or

(b) operates any enterprise for or on behalf of analien who is under the Decree

(i) not permitted to operate the enterprise,or

(ii) disqualified from operating theenterprise, or

(iii) not permitted to own or be part owner ofsuch enterprises, shall be guilty of anoffense under this section, and shall beliable on conviction to a fine of N15,000or to imprisonment for a term of fiveyears or to both such fine andimprisonment .

The NEPB this time expected all expatriate firms formerly

incorporated in Nigeria under the decree, to furnish to

them by February 28, 1977 with the following

information:

I. Name of enterprise;

II. Registration number and date;

III. Date of commencement of operation;

IV. Full address, including the name of the street

and P.O. Box, including telephone number;

V. Full address of physical trade if different

from Number IV;

VI. Nature of business and kind of activities;

7 1 "Alien Firms Ordered to Submit Data," NewNigerian, January 5, 1977.

67

VII. Names and nationalities of proprietors;

VIII. Paid-up capital as of April 1, 1974;

A. Total . . .

B. Foreign . . .

(1) Amount . . .

(2) Percentage . . .

C. Indigenous . . .

(1) Amount . . .

(2) Percentage . . .

IX. Names and full address of bankers;

X. Name and address of managing director or

general manager; and

XI. Name, signature, designation, address and

date.72

They finally got all the information by the end of 1977

and were tabulated and evaluated.

Although the second phase of the indigenization was a

success, some alien firms still tried to evade the 1977

Decree.73 A few companies resorted to voluntary

liquidation, which the NEPB declared to be unacceptable

and insisted that all affected enterprises had to comply

7"AnAd of the NEPB Calling for the Submission ofthe Preliminary Date Form I, 1976," Sunday Times, January16, 1977.

735. Osaji, "Success of Failures of theIndigenization Decree, Business Times, February 14, 1979,p. 3.

68

with the provisions of the Decree as going concerns.

However, genuine cases were accepted as long as

expatriates of such companies obtained approval.

CHAPTER IV

THE ECONOMIC ENVIRONMENT IN NIGERIA

The most critical factor impinging upon the

operation of any business in Nigeria is the country's

infrastructure, which will be the main focus of this

chapter. Good roads, railways, ports, energy systems,

communications, and other infrastructural factors are

vital for the growth of indigenous private enterprise.

Examining the economic history of the advanced countries

of the world, it may be observed that economic success

has largely depended upon the effectiveness of the

infrastructure.)

Construction and Maintainance

of Roads

Efficient transportation alleviates scarcities and

shortages and, thus, contributes towards price stability.2

Widespread transportation increases the assortment of

goods available to the community and tends to reduce and

W. Elliot Brownlee, Dynamics of Ascent: A Historyof the American Economy (New York, T797, p. 19 -24.

D.P. Locklin, Economics of Transportation, SeventhEdition (Homewood, Illinois, ~972) .2-4.

69

70

to equalize prices throughout the economic environment.

Efficient transportation favors the mobility of labor

and permits effective utilization of geographical

specialization.

In the 1960's when most African countries gained

independence, road building was one of the major projects

in each of their plans. Nigeria was no exception.

During Awolowo's Administration, just prior to

independence, the most important deteriorating roads and

bridges were strengthened, widened and resurfaced.3

Since independence, Nigeria's road system has grown

rapidly in terms of quality and total distance. This

growth and maintenance continued after the severe .damage

which occurred during the Civil War.4 From 1951 to 1972,

the total distance of paved roads increased more than

tenfold, from 1,782 kilometers to 18,109 kilometers.

During the same period, the total road network, more than

doubled, which included unpaved roads. The increase was

from 44,414 kilometers in 1951 to 95,374 kilometers in

1972.5

3Awolowo, Awo (London, Cambridge, 1960), p. 286.

4Confederation of British Industry, Nigeria 1970,London, 1971, P. 21.

5 Federal Republic of Nigeria. Third NationalDevelopment Plan, 1975-1980, I (Lagos, 1975), .Z03.

,

71

The military government, in 1976, accelerated the

continuing work on a national integrated highway system.

The project had been started earlier with the

Jos-Bauchi-Kari-Beni Sheik road link (499 km), the

Ikom-Ogoja-Kat-Sina Ala-Mutum Biu-Mayolope-Biu road (892

km), the Idi-Oro bridge, as well as the Lagos Inner Ring

Road projects.6 Road building and maintenance was a

responsibility divided among the federal, state and local

governments. The federal government was responsible for

the Trunk "A" roads which link the nineteen state capitals

and ports. The rest of the roads were maintained by state

and local authorities. In 1972, the federal government

was responsible for 10,607 km of roads, whereas the

various states maintained 21,168 kilometers, and the local

governments 63,600 km.7 This apportionment of

responsibility in maintaining the roads subsequent to

construction was not very effective, because the state and

local governments possessed insufficient resources to care

for their roads. The result was generally poor standard

of road construction at the local level and substandard

international Monetary Fund, Nigeria, RecentEconomic Development (Washington, D.C., AugustT370,T977),pp. 19-20.

7M. 0. Filain and Iz. Osayimwese, The NigerianJournal of Economic and Social Studies, XVI,9 T74,p. 39 . ~

---------

72

maintenance of most local roads. Consequently, at the end of

1978, the military government decided to maintain all of

the country's roads subsequent to construction.8 State

and local governments continued to construct all but the

new Trunk "A" roads.

Road maintenance in Nigeria had been a very serious

problem, with newspapers constantly giving accounts of the

physical conditions of the roads, their safety, and the

number of accidents. In 1974, for example, the World Bank

Country Economic Report detailed the poor condition of the

roads leading to rural areas.9 The condition of the

Trunk "A" roads varied from good to extremely poor. These

sections of the roads with surfaces were generally poor

and inadequately maintained.'0 Some of the newly

constructed roads were without adequate drainage systems

and became fatal traps to motorists during heavy rains. 1

Country roads over the years have remained deplorable,

8Daily Times, December 4, 1978, p. 4.

D W. Times, editor, Nigeria: Options for Long-TermDevelopment (Baltimore) ,p$T8

O0S.0 . Ouakomaiya, "Modernization of Road TransportPlanning Strategies in Nigeria," The Quarterly Journal ofAdministration, XII (1978), pp. 397401.

11S. Odede, "Will Our Roads Ever Be Safe?" DailyTimes, December 20, 1978, p. 7.

-

73

with most of them almost impassable during the rainy

season. 1 Nigerian roads also suffer from the excessive

speeds at which Nigerians drive. The not uncommon

presence of armed highwaymen encourage driving at exces-

sive speeds on highways.1 3 Most Nigerians are reckless

drivers, and when it comes to speeding, they are almost

never law abiding. This state of affairs attributed to

the fact that "it had become a practice for people to

obtain their driving licenses even before they mastered

how to insert the ignition key.' 4 Between 1962 and 1972

the Nigerian mortality rate due to road accidents grew at

a compound rate of 9.5 per cent annually.1 5 The

deteriorating condition of the road network has

effectively forced a reduction of operating speeds in many

parts of the country, and consequently, increased

maintenance costs. It has become impossible for the

trucking industry to use the roads at night for fear of

robbers who are in total control of the highways after

dark. The poor state of road conditions generated

negative externalities which have adversely affected

12 Daily Times, January 16, 1979.

13Business Times, January 23, 1979, p. 14.

J. Odede, "Will Our Roads Ever Be Safe?" DailyTimes, December 20, 1978, p. 7.

15 M. 0. Filani and Iz Osayimwese, "The Organizationof Transport Planning In Nigeria," The Nigerian Journalof Economic and Social Studies, XVI X74), p. 394.

74

Nigeria's trade and industry. In order to rectify this

situation large sums of development funds have been

directed to this end. During the 1975-1980 Development

Plan almost 25 per cent of the budget was set aside for

transportation, a great portion of which was budgeted for

road construction. 16

Railways in Nigeria

The Nigerian railroad network was started in 1898 and

completed by 1914 when 930 miles (1,480 kilometers) were

in operation. 17 In the early 1960's, the Nigerian Railway

Corporation operated two main lines from Lagos to Kano,

about 1,100 kilometers long, and from Port Harcourt to

Maiduguri in the north, a distance of about 1,435

kilometers. 18 By 1975, the total length of railroad

tracks extended to almost 3,500 kilometers.1 9 In 1960,

the railway tracks of the northern region had been

considerably extended with the aid of a $10 million loan

from the World Bank.2 0 The Nigerian Third Development

16 Third Development Plan, 1975-1980, I, p. 199.17G. 0. Ijewere, "Rail-Road Problems in Nigeria,"

Nigerian Journal of Economic and Social Studies, 1 (1959),P. 19 ._

W. Tims, editor, Nigeria: Options, p. 188.19

Ibid.

20G .K. Helleiner, Peasant Agriculture, Governmentand Economic Growth in Nigeria (Homewood,Illinois,96)p . 3 " ~~

75

Plan (1975-1980) envisaged an ambitious railway expansion

program that required $1.4 billion for track extension,

standardization and purchase of new rolling stock and

communications equipment.21 The Nigerian railway system,

which was very slow and inadequate, suffered from poor

management and very serious competition from the trucking

industry.2 2 The decline in railroads had a great deal to

do with the keen competition of the trucking industry and

the advantage of trucks transporting goods, by road, from

door-to-door. In addition the costs of road trans-

portation was relatively cheaper than railroads, despite

poor maintenance and highway robbery.23

Consequently, the Nigerian Railway Corporation was

running at huge losses which had to be subsidized from

public funds. According to one authority, the Nigerian

railroads are very "unprofitable and inefficient." 2 4 The

21 Third National Development Plan, 1975-1980, I,Lagos, T737~~ p. 216.

22. 0. Olayade, editor, Economic Survey of Nigeria(1960-1980) (Ibadan, 1976), p.JTT.

23S. Tomori, "The Financial and Commercial Policiesof the Nigerian Railway Corporation," Public Enterprisesin Nigeria, Proceedings of the 1973 Annual Conference oftUe Nigerian Economic Society (Ibadan, 1974), p. 155.

I. Osayimwese, "Comments," (on S. Tomori's "TheFinancial and Commercial Policies of the Nigerian RailwayCorporation.") in Public Enterprises in Nigeria,Procedings of the 1973 Annual Conference of the NigerianEconomic c_ety (Ibadan, 4),p._.

76

Nigerian Railway Corporation has suffered from a shortage

of good, experienced engineers and an abundance of poor

managers and administrators.2 5 in view of this situation,

the Nigerian military government decided to take drastic

measures. In 1979, 380 Indian railway experts arrived in

Nigeria to revive its railroads.2 6 These experts were to

take over the entire railway system for three years in

order to improve its efficiency.27 After a short while it

was reported that "the crumbled corporation's workshops

had been quickly revitalized for repairs to be effected on

the many broken down locomotives, wagons and coaches." 2 8

Nigerian Ports

There are six ports in Nigeria, i.e. Lagos, Port

Harcourt, Warri, Calabar, Koko and Burutu. Lagos is the

most important port and it is through Lagos that most of

the imports enter the country. In the 1970s, about 80% of

all imports came through the port of Lagos.29 With the

25 Ibid., p. 156.

2 6 Daily Times, January 9, 1979, p. 3.

2 7 "Curing the IUS of NRC," Business Times,January 16, 1979, p. 7.

285. Egbochukwu, "Rail Transport Revamped," BusinessTimes, May 22, 1979.

29 F. S. Idachaba, "Transport and Communications,"Economic Survey of Nigeria, 1960-1975, edited by S. 0.

1ayade (IbadanT976T, pp. 114-115.

77

oil boom in Nigeria, the congestion in the port became

extremely serious and by the end of 1975 over 300 ships

were waiting to unload cargo.30 To remedy this problem,

the Nigerian Port Authority decided to unload ships

anchored out at sea by lighterage.31 After it was

officially reported that Lagos and Port Harcourt were

"seriously overstrained,"3 2 the military government,

during the last quarter of 1975, gave top priority to the

decongestion of the ports.3 3

The main cause of port congestion in Nigeria was an

unprecedented volume of cement imports into the country by

the public sector, notably the Ministry of Defense.3 4

Another major problem in the Nigerian ports was very

loose security that allowed pirates to operate on a

considerable scale in and around the sea ports. In an

effort to correct this problem in January 1977 the

Nigerian Navy began dusk-to-dawn patrols with orders to

30 G. Arnold, Modern Nigeria (London, 1977), p. 126.

31 "Lagos Port Contract," Africa, April 1975,p. 82.

32 "Nigeria Takes Steps to Decongest the Ports,"Afriscope, J (October, 1975), p. 61.

3 3 International Monetary Fund. Nigeria, RecentEconomic Developments (Washington, D.C., August 1977),p. 19.

34 Federal Republic of Nigeria, Report of theTribunal of Inquiry into the Importation of cement (Lagos,1976),13T-pages.

78

shoot at sight any offending pirate craft. 3 5 To futher

cope with this problem the military government embarked

upon considerable general port development. Nigeria is,

and may remain for a long time, an import-oriented country

with a need to import most of its capital goods. Rapid

economic and social development depends upon imported

capital goods which in turn requires efficiently operated

ports.

This problem of port congestion greatly affected

the ultimate purchasers who experienced shortages of

consumer goods, spare parts and partially manufactured

goods. When these items eventually became available,

prices were considerably higher than anticipated. All

port-related charges were simply passed on to the consumer

who had no choice but to pay those charges. Machinery,

equipment, parts and supplies were occasionally damaged

during the long wait aboard ships, on the wharves or in

transit. When the delayed goods finally arrived at the

particular plant, production programs invariably had to be

rearranged causing production costs to soar.

35"Pirates Will Have It Rough," Daily Times,January 5, 1977.

79

Electric Energy

The production and distribution of Electric energy is

another very important aspect of a country's infra-

structure. Electricity generation in Nigeria started in

1898, but it was not until after independence that the

expansion of the power network emerged.3 6 It was after

the Civil War (1967-1970) that the former Electricity

Corporation of Nigeria and the Niger Dams Authority were

merged in 1972 and the National Electric Power Authority

(NEPA) was created to control the electricity supply and

distribution. 37

With the oil boom, electricity consumption greatly

increased.3 8 In 1976-1977, the consumption rate had risen

to over 20 per cent per annum.39

The high demand for electricity is an indication that

the available generating capacity had not been adequate to

meet the high demand for electricity. This has been

36 lnternational Bank for Reconstruction andDevelopment, The Economic Development of Nigeria(Baltimore, Md., T955),7p. 56-57 and 43T.

375.0. Olayde, editor, Economic Survey of Nigeria(1960-1975) (Ibadan, 1975), p.7

38Third National Development Plan, 1975-1980, I(Lagos,~TF7),) p. 1975T.

Io West Germany, Bundesstelle fur AnssenhandelsInformation, p. 5.

__

'-iV.fli

Py

1 .. wY^ Yfi"t,'.e':n.:rw .. 'u _ %(yw,> ,

MAW 0 HIM IN -mollmmmilml, Poll INIMMURNmr4mTT- _ - t

80

reflected in frequent electricity blackouts and brownouts.4 0

The nonchalant attitude of some highly placed officials in

NEPA has been mentioned as one of the reasons for the

continued power failures.4 1 In the 1970's electricity

supply in Nigeria was both inadequate and inefficient. It

was so sporadic that in 1978 the Movement of the People

Party (MOP), led by Fela Kuti promised Nigerians a

twenty-four hour uninterrupted supply of electricity if

elected.42 Newspapers reported accounts of continued

power failures and in December 1978 it was found that

damaged underground cables had been responsible for most

of the electricity blackouts.4 3

The actual problem stemmed from inadequate

maintenance of power plants and transmission lines.4 4 The

prolonged and continued electricity blackouts were very

costly to the Nigerian economy. One economist,

40 I.I. Ukpong, Economic Aid and the Development ofInfrastructure in Nigeria, paper presentedat the 7tHAnnual Meeting of the Arican Studies Association(Chicago, Illinois, 1974), p. 5/mimeo.

41 Business Times, May 23, 1978, p. 19.

42Daily Times, December 18, p. 19.

43 "Dark Days Ahead, NEPA Warns," Daily Times,December 1, 1978, p. 1.

"A Nation Being Choked by an Alien Culture," DailyTimes, December 28, 1978, p. 3.

81

I. I. Ukpong said that "as a strategic input in the

development process, electricity supply must be regular

and must increase with the demand for it from industry and

agriculture."4 5 According to Ukpong, "the lack of routine

maintenance was one of the main causes of breakdowns

leading to power failures."46 Unreliable and insufficient

electricity supply produced negative externalities on the

productive sectors of the country. This could be likened

to the Lagos port congestion that caused an acute shortage

of raw materials and consumer goods.4 7 Electricity

brownouts also destroyed electronic and other equipment

which required extra costs for replacement and repair.

In order to prevent unforeseen interruptions in

production, Nigerian businessmen installed emergency

standby equipment which also raised their costs of

production. The slow-down of the country's industrial-

ization was partially attributed to the failures of NEPA.48

Power failures were particularly serious in the Lagos

4I. I. Ukpong, "Economic Consequences of ElectricPower Failures in the Greater Lagos Area," The NigerianJournal of Economic and Social Studies, XV, MarchJ19T3,

Ibid. ,p. 58.

4 7 "TEMA)to the Rescue of Lagos," Africa (September1975), p. 89.

4 8Business Times, May 2, 1978, p. 19.

. _ ' _a]4 ."ny a .:'..; pyi :: cax. _ .1: ' « Yii iYevr,,.,. ;..r'di'Y' S A aa-.' w .,..3.. ._

82

area during late 1977. At Ikeja, for example, industrial

production was down by 40 per cent of planned output, and

many companies suffered financially.4 9 The country's

growing population together with the concentration of

industries in Lagos, and recognizing that Nigeria is still

a developing country, helps to account for much of the

country's electricity problems.

Communications

Good communications systems in any country, is an

indispensable part of that country's infrastructure.

Communications here means telephone, telegraph and telex.

A well functioning telephone network is an absolute

necessity for the development of business, administrative

and social life of a country. In Nigeria, the post office

and internal communications services are owned and

operated by the federal government, while the external

communications are provided by the Nigerian External

Communications Corporation that is partly owned by the

government and partly by a private company.5 0

In the 1970's most telephones and telegraphs in

Nigeria were either out of order or functioned very

49Business Times, May 23, 1978, p. 21.

50 W. Tims, Nigeria: Options,p. 93.

83

erratically. The president of the Nigerian Manufacturer's

Association reported in 1978 that in Lagos State alone

about 1,500 telephones were out of order. Some manu-

facturers had installed telex machines but were unable to

use them because the Post and Telecommunications

Department was short of labor and spare parts to keep them

in good working condition.51 For example, the telex of

E. 0. Ashama and Sons Holdings, Ltd., of Lagos, had not

beem working for three years.52 An inefficient, not to

mention dead, communication network in Nigeria created

enormous financial burdens on Nigerian firms. Without

telephones, messengers and vehicles had to be used

instead. That raised cost of production in all industry.

The density of telephones in Nigeria was one of the lowest

in the world and this was an obstacle to economic

transformation of the country.5 3 During the Third

Development Plan Period the government invested very

heavily in the area of communications.5 4

51 T. A. Odutola, "The Sufferings of the PrivateSector," Management in Nigeria (March/April 1978),pp. 31-32.

52 R. R. Leger, "Black Power: Nigerian Tribal LeaderWields Great Influence in Business in Politics," The WallStreet Journal, CLXXXXIV, October 30, 1979, p. l.

53 Business Times, January 24, 1978, p. 24.

54 Barclays Bank International, Nigeria, A BarclaysInternational Business Profile, 1974 (LondonSeptember1974), p. 9.

84

At certain hours in Nigeria, it is almost impossible

to make a phone call. Despite some improvements in the

system, telephone communications continue to be slow and

unreliable at certain periods of the day.55

Education

High quality of education may be seen as an

externality favorable to the productive sector of the

economy. Africans are convinced that education is one of

the most important and prestigious personal achievements.

Gradually, if not immediately, it elevates an individual

into a higher social status. Chief Awolowo, the former

Prime Minister of Western Nigeria, reflecting the attitude

of most Nigerians, once said that

the provision of education and health in a developingcountry such as Nigeria is as much an instrument ofeconomic development as the provision of roads, watersupply, electricity and the like. To educate thechildren and enlighten the illiterate adults is tolay a solid foundation, not only for the futuresocial and economic progress, but also for politicalstability. A truly educated citizenry is, in my view,one of the most powerful deterrgrts to dictatorship,oligarchy and feudal autocracy.

5 5The Evening Sun, November 3, 1976.

560. Awolowo, Awo, The Autobiography of Chief Awolowo(Cambridge, 1969), p. 26$.

85

He wanted to introduce free primary education as early as

January 1955,57 and also to provide high school education

for at least 10 percent of the students who had success-

fully completed the eighth grade.58 Northern Nigeria,

which is the most thickly populated region had only a

handful of university graduates and probably no more than

2,000 high school graduates.59 In 1972, "for every child

in a primary school in the northern states there were four

in the southern states; . . . . And for every student in a

secondary school in the north there were six in the

south."60

Nationally, enrollment rates at schools were very

low. In 1920, for instance, one out of three children of

school age was in primary school and one out of twenty-

five children was in high school.6 1 School dropout rates

were also very high due to inadequate facilities, poor

quality teaching, insufficient financing and, probably

571bid., p. 274.58

Ibid., p. 287.59 M. Crowder, A Short History of Nigeria, Revised and

Enlarged~Edition (New York,1966)F . 293.60 G. 0. Nwankwo, "Nigeria: Educational Pattern and

Development Needs," Africa, February 1975, p. 31.

1Ibid.,p. 31.

ds R-"". .. ;,i7"+ir?:-..A'eta;i7+rs . 6i 7i:6ma9 :ie rAc ni6 ,. - ....

86

most important, was that illiterate parents took very

little interest in the education of their children.62 In

order to eradicate mass illiteracy in the country, and

with the help of petro-dollar income during the 1970's,

the military government in the Third Development Plan

promised a universal free and compulsory primary education

for the entire nation that would start in 1976. To this

effect, the Nigerian Head of State, Obasanjo finally

announced in 1977 the launching of free and universal

primary education program throughout the country. He also

announced that technical high school teachers' training

and polytechnic education would be totally free, while

university education would be only tuition free.6 3

Despite the billions of nairas that were spent to

improve education in Nigeria in the 1970s, the literacy

rate for the country in 1977 was only 20 per cent.6 4 In

order to increase literacy rate in Nigeria to a resonable

level, billions of nairas will have to be spent in

addition to producing thousands of grade school teachers.

62 P.A.C. Isichei, "Special Report: Nigeria. One

African Language?" Africa, (November 1973), p. 66.6 3 "Nigeria Plans for Free Higher Education," Africa,

February, 1977, p. 32.

6 4 G. Arnold, Modern Nigeria (London, 1977),p. 103.

87

With the introduction of universal free education in the

country, enrollment in grade school has improved between

1960 and 1980, although much less than might have been

expected. Table IV shows the enrollments in Nigeria's

grade schools from 1960-1980.

Although enrollment from Table IV indicates some

slight progress, the dropout rate in grade schools is. an

unbelievably high 40 per cent.6 5 By 1973, there were only

six universities in the country, with one in the north and

five in the south. The only one in the north, Amadu Bello

University, was owned by the six northern states serving

roughly 52 per cent of the population. The other five

universities included two federal government universities

at Ibadan and Lagos. The other three are state-owned

higher schools of learning at Nsukka, Ife, and Benin.

They are owned respectively by East Central, Mid-Western,

and Western state governments. Towards the end of the

1970's, the number of universities in Nigeria had

doubled. Nigeria still is in great need of professional

and skilled labor, a situation which is also true in other

developing countries.6 6 One reason is that most Nigerian

65 T. M. Yesufu, "Employment, Manpower and EconomicDevelopment in Nigeria: Some Issues of Moment," TheNigerian Journal of Economic and Social Studies, 17T+,p. 57.-

66 L. Mouat, "Education: Key for DevelopingCountries," The Christian Science Monitor, December 30,1974, p. 2.

88

TABLE IV

NIGERIAN GRADE SCHOOL ENROLLMENTS(in Millions)

Enrollment

1961b..-.........................................96 ..........................................1964..............................................

97 ...........................................96..-------.--...-.-........................9....-..--- ......-........................

1978-198.a-.----........................

2.92.82.83.94.06.28.0

11.5

Sources: aFederal Republic of Nigeria. Third

bNational Plan, 1975-1980.J aysideXed.), Economic Survey ofNigeria (1960-1975) (Ibadan,7F9767,

cp. 23 .New African Yearbook, 1979 (Lomon, 1979),p. 227.

Year

.. , .

i

89

students prefer to study psychology, sociology, history

and geography and tend to neglect accounting, engineering

and agriculture.

Institutional Infrastructure

Institutional infrastructure in Nigeria refers to

the country's governmental bureaucracy, the legislative

process and the prevailing legal frame work. Although

institutional infrastructure by itself produces nothing

quantitative, without it the country simple could not

function.

Nigeria returned to civilian rule after thirteen

years of military rule in 1979. The first elected

civilian president after the military rule, Alhaji Shehu

Shagari, vowed to "maintain the former military regime's

strong support for black African Nationalism."6 7 Until

1980, Nigeria had nineteen states and nineteen state

governments, in addition to the federal government capital

in Lagos. In the days of the military rule, 1966-1979,

nearly every initiative emanated from Lagos. The nineteen

state governments were mostly passive. Nigeria has taken

"the irreversible decision that government will occupy the

6 7 "New Nigerian President Will Use Oil as

Weapon," The Bethlehem Globe Times, October 2, 1979,p. 15.

90

commanding heights of our socio-political and economic

life." 6 8 The efficiency of Nigeria's private sector

depends on

the existence of an efficient public service, notonly in terms of the provision of infrastructuralservices and utilities, but also because of theability of the Higher Civil Service to respond to thecomplex needs of industry and commerce in the privatesector.69

By 1965, the Federal Service consisted of some 100,000

people, which supposedly represented the best brains and

organizational skills of the country.7 0 By 1977, the

number of civil servants had risen to almost 200,000.71

In the 1960's crash programs to upgrade and indigenize the

public service, including public corporations, led to a

decline in the quality of services in many areas. Less

qualified Nigerians were taking over old jobs and newly

A. A. Ayida, "The Federal Civil Service andNation Building," The Quarterly Journal of Administration(Aril/July 1979), pT.21/.

69Ibid., p. 225.

A. H. M. Kirk-Green, "The Higher PublicService,"" The Politics and Administration of NigerianGovernment7,editeTL.T. Blitz(New York,~ 1965),

pp. 103.7A. A. Ayida, "The Federal Civil Service," p. 223.

-.

91

created ones.72 According to T. A. Akinyele, the major

weakness of the civil service is its inability to instill

and enforce discipline.7 3 Lack of discipline is exper-

ienced at all levels of public service and a warped sense

of duty prevails. He pleaded for the introduction of

discipline as a way out of the administrative malaise of

the late 1970's.74

In 1975, many civil servants were regularly absent

from their offices, were quite arrogant to the public, and

were discharging their duties sluggishly and reluctantly. 7 5

Nigerian government workers were widely known for their

laxity, corruption, and inefficiency.7 6 When General

72JT.I. Tseayo, "Organizational Determinants ofWorker Productivity with Particular Reference to theNigeria Public Services," (NISEK Conference, September 27,October 4, 1975), p. 12.

73 T. T. Akimyde, "On Being a Higher Civil Servant,"The Quarterly Journal of Administration (April/July 1979),p. 23T

74Ibid.,p. 235.

75v. P. Djejomah, "Nigeria's Public Service.Wages Increase and Economic Growth," Afriscope, 1975,p. 7.

76A. A. Ayide, "The Federal Civil Service andNation Building," The Quarterly Journal of Administration(April/July, 1979), pp.217-229.~~

92

Murtala Muhammed ousted General Gowon in a bloodless coup

in mid-1975, he was determined to eliminate corruption in

the government offices and declared total war on

corruption and laziness. He then issued an order that

there would be no more lateness in starting work in

government offices.

This was not easy to accomplish in Lagos because of

the great Lagos traffic congestion. In 1973, it took about

three hours for some senior federal civil servants to get

through the traffic chaos on their way to and from work. 78

Although Murtala tried very hard to cope with the slow

traffic in Lagos, he accomplished very little. He set up

an anticorruption unit and issued a decree stipulating a

penalty of ten years or a $15,000 fine or both for

corruption of any type. Seven months later he dismissed

more than 10,000 civil servants, army and police officers

who were accused of corruption, abuse of office and

indolence. 79 Despite General Muhammed's efforts to stamp

out corruption, corruption continues to be very much in

evidence in Nigeria.

77 "Corruption and Laziness Barred. Nigeria's NewLeadership," The Christian Science Monitor (October 23,1975), p. 16.

78S. Aluko, "Nigerian Universities," Africa (December1973), p. 54.

A. 0. Ezehekwe, "Corruption-Cleanup Backlash BehindNigeria's Shortlived Coup," The Christian Science Monitor(March 11, 1976), p. 26.

93

Law and Order

The inability to provide adequate security for the

Nigerian people and property is one great problem facing

the country. It was reported in 1978 that "the incidence

and depravity of crimes in our society in 1978 are

unprecedented for their bestiality. The sanctity of human

life is violated almost with impunity."80 Crimes like

being forced on pain of death to part with ones car or

money, or being run down by a motorcycle gang and many

others are reported daily in the press. Way-laying of

vehicles on the road and robbing of passengers is quite

common throughout Nigeria.81 People rarely drive at night

for that reason. At the Baleva Square in Lagos, and at

the airports, passengers are robbed by pick-pockets.8 2

There is no Nigerian who does not know about the extent of

insecurity and lawlessness throughout the nation. Although

Nigeria has survived these difficulties, lawlessness and

insecurity have created externalities which have cost

businessmen and others extra outlays to protect their

property.

800. Dare, "Morbid Gravediggers," Daily Times,January 25, 1979.

8"NowIt's All-Out War on Bandits," SundayTimes, December 10, 1978, p. 3.

82"100 'Undesirable' People Held at IkejaAirport," New Nigerian, January 11, 1977.

.

94

Inaccessibility to Information

Information which is one of the most important

factors in running a business, is very inaccessbile in

Nigeria, especially since 1967. Early in 1974, during the

First National Conference on Management Development in

Nigeria, a number of speakers deplored the inadequate flow

of information for Nigerian management.83 Professor

Alfred Opubor of the University of Lagos in 1979, stated

that in Nigeria "basic information had become a commodity

being hoarded by public officials to whom such information

had been entrusted." 8 4 A. E. Ekukinam, a former Minister

of Finance, once complained that "scarcity of accurate

economic and business information is the most frustrating

obstacle encountered by those interested in investing in

our development." He continued to say that economic data

and business information ". . . are between file folders

in both public and private sector offices, and retrieving

information from files and archives may prove

83 P.N.C. Okigbo, "Management and the Application ofAppropriate and Progressive Technolgoy in Nigeria,"Management Development in Nigeria. The Challenge ofIndienization, edited y U. Udo-Ara H. Aie, andM. KayodeT(Ibadan, 1977), p. 127.

8 4 "Tight Lip Officials Ruin Government-Don,"Daily Times, January 22, 1979, p. 5.

95

frustrating."' 8 5 In most instances, information has to be

obtained by bribing government officials, which increases

the cost of doing business.

85A. E. Ekukinam, "Views from the Top: OurChallenge," Nigerian Enterprise, November/December 1977,

p. 9.

CHAPTER V

ENTREPRENEURSHIP IN NIGERIA

According to Schumpeter, and most other economists,

the entrepreneur is the critical decision maker in a

capitalist economy. A high degree of business entre-

preneurship is of great significance to the success of any

such economy.

The Importance of Entrepreneurship

in Nigeria

Entrepreneurship is an extremely important factor in

economic development. W. Arthur Lewis argues that

providing money to entrepreneurs who lack business

capacity is wasteful, since the main deficiency of local

enterprise is usually not capital but entrepreneurship.2

Without the entrepreneur, labor, capital and natural

resources cannot be combined effectively.

J. A. Schumpeter, The Theory of Economic Development

(Cambridge, 1949) p. 45.2"Aspects of Industrialization," Nigerian Trade

Journal (October-December 1954), pp. 11-12.

96

97

The Third Nigerian National Development Plan, 1975-

1980, observed that "manpower or executive capacity remains

a bottleneck to the development of the nation.

Management or entrepreneurship, as a resource is generally

in scarce supply in the Nigerian economy." 3 Professor W. F.

Stolper, who directed the Economic Planning for the First

Development Plan in Nigeria, 1962-1968, did not have the

slightest doubt that money for development purposes would be

forthcoming, but that the real limitations of the plan would

4be manpower; and especially executive manpower. It, was a

widely held opinion within Nigeria that the main problem of

the indigenous Nigerian businessman would be his lack of

entrepreneurship.5 Enabor argued that "the generally low

level of efficiency of Nigerian forest industries was

3 Nigerian Ministry of Economic Development, ThirdNational Development Plan, 1975-1980 (Lagos, 1975),p. 4 , 4.

4 "The Main Features of the 1962-68 National Plan,"Nigerian Journal and Economic of Social Studies (July

5 Geral K. Helleiner, Peasant Agriculture, Governmentand Economic Growth in Nigeria(Homewood, Illnois, 1966),pp. 265-266.

attributed to nonexistence of mill maintenance facilities,

poor training of operators and low entrepreneurial

performance."6

The Nature of Entrepreneurs

Nigerian entrepreneurs tend to be very industrious

individuals who have established many small enterprises.

In September 1960, it was estimated that there were about

a quarter million indigenous enterprises in Nigeria. 7

Regardless of sex, amount of education or business

experience, any such enterprises could be started very

easily. Ownership of capital was often of very little

significance. Some entrepreneurs relied virtually

entirely on advances from their suppliers. The "know-how"

usually required was simple and people had acquired it as

workers in other firms or through government employment.

Labor required was mostly unskilled and semi-skilled and

was usually cheap. The multifaceted one-man business is

common in Nigeria. An entrepreneur is successful in

one line, but instead of enlarging operations in that line,

he may branch out into other fields. The most common

6 Ephriam E. Enabor, "Nigeria's Foreign Trade inForest Products," Nigerian Journal of Economics andSocial Studies (July~T973T, p. 93.~

7 "Notes on Entrepreneurship," Nigerian Trade Journal(April-June 1963), p. 64.

98

99

cases are trading combined with transportion and

construction. The success of many entrepreneurs has been

achieved through the establishment of several unrelated

businesses. 8 These enterprises, if handled carefully,

would grow to a critical size that would necessitate a

higher level of organization, marketing and technology.

At that stage of the enterprise the entrepreneur would run

invariably into problems associated with growth. The

greater difficulty in coping with larger organizatinal

issues is why there were fewer indigenously owned large

scale enterprises in developing countries as opposed to

many foreign ownerships of such enterprises.

With regard to Nigerian mining, in 1963, it was

discovered that operations had a certain limited size

based on the labor-intensive, simple technological methods

that were employed by the indigenous entrepreneur s.9 John

Harris discovered, in the saw milling industry, that as

output expanded the entrepreneur could no longer depend on

8 John J. Carroll, The Filipino ManufacturingEntrepreneur (Ithaca, N.Y. ,1965),pp. 106, 110-1; and

usiT A. Sayih, Entrepreneurs of Lebanon (Cambridge,Mass., 1962), pp. 554-572.

9 "Nigeria's Tin Resources," Nigeria Trade Journal(April-June, 1963), p. 64.

100

supervising the production process personally. The

organization of the firm needed to be more complex than it

had been and required both delegation of responsibility

and advance planning of work tasks. As an apprentice, the

entrepreneur was never prepared for the intricate situa-

tions that would occur later in a successful career. 10 The

marketing horizon of the small enterprises in Nigeria was

very limited. The entrepreneurs knew little about broader

prospects of the market in which they operated and were

unable to benefit from economies of scale which could only

be achieved by a wider penetration of the market.

Trustworthiness in the Nigerian

Business Society

Mutual trust is the essence of any business

relationship and this quality was often lacking among

Nigerian businessmen. Government loan programs had

frequently been abused by their recipients. Loan

repayments were often difficult to collect unless

accompanied by specific threats. For example, during 1961

and 1962 the Federal Loans Board belatedly received

1 0John R. Harris and Mary P. Row, "EntrepreneurialPatterns in the Nigerian Saw Milling Industry," NigerianJournal of Economics of Social Studies (March 1966), p. 79and PeterTKiTby,The development of mall Industry inEastern Nigeria (Lagos, 196,pp.l5-T6; also see uyHunter, The New Societies of Tropical Africa (London &Ibadan, T9~2) pp:.22-325~

101

hurried payments from debtors upon notification that if

they did not pay their loans the property they had pledged

as security would promptly be seized and sold.1 1 Bankers,

other foreign businessmen, and Nigerian political leaders

were forced to solve collection problems in a similar

fashion.1IL2 The difficulties in achieving collections and

repayment of loans had the effect of limiting the credit

advanced to indigenous businesses and thus tended to limit

their growth. Consequently, small-sized indigenous

businesses continued to be prevalent. The atmosphere of

untrustworthiness hurt the credit and limited the growth

of many well intentioned businessmen who had viable plans

for expansion and who needed assistance from financial

sources. G. Ogunpola, among others considered this a

major set-back to the development of large corporations.13

This kind of commercial atmosphere in a society limits the

rate of economic growth.

""The Loynes Report and Banking in Sierra Leone,"Bankers' Magazine (July 1962), pp. 19-27; also see Hunter,

'2 Nigeria, Federation, Debates of the House ofRepresentatives, Session 1959-9W(August 9,96JT,Columns 2321-2322.

13G. Akin Ogunpola, "The Pattern of Organization inthe Building Industry: A Western Nigerian Case Study,"Nigerian Journal of Economics and Social Studies (November196),p.35 5~35T-35W

102

Another factor impeding business credibility was the

wide extent of "fronting," by which the claim to

indigenous ownership (entitling the owners to special

benefits) was, in fact, fraudulent.

Entrepreneurship may be considered a national

characteristic of Nigerians generally and of the Ibo in

particular. Nigerians tend to seize every available

opportunity to pursue any economic advantage. They are

flexible and venture agressively in quest of profitable

businesses. 14 Dr. Bauer states that "the general

impression I formed was always the same: exceptional

effort, foresight, resourcefulness, thrift and ability to

perceive economic opportunity.",15

Entrepreneurship and Education

Studies on entrepreneurship in developing countries

indicate a direct relationship between the education of

the entrepreneur and success of the firm.16

1. P.T. Bauer, West African Trade (Cambridge, 1964),p. 3 0.

15 Federal Loans Board, Sixth Annual Report, 1961-1962(Lagos, 1962), p. 9.

16 Carroll, Filipino Manufacturing, and Sayih,Entrepreneurs ofTLebanon

103

In Nigeria it was discoverd that the average

educational attainment of Nigerian entrepreneurs in firms

with eight or more employees was more than that of the

population as a whole.1 7 However, if entrepreneurs from all

sizes of industrial firms are considered, it seems very

likely that the average education of entrepreneurs would not

be higher than that of the population at large. Theodore

Geiger and Winifred Armstrong also found out that there is a

positive relationship between entrepreneural education and

gross sales of the firm.1 8 The sample used in this study

consisted of sixty-four Lagos entrepreneurs in

manufacturing, construction, trading, services and

transportation.

The Nigerian Industrial Development Bank was

established in 1964 as a privately owned and foreign

controlled institution. In 1976, the federal government

bought out the foreign shareholders of the bank.1 9

The Bank actively promotes indigenization, and assists

in projects sponsored by both the government and private

industries. The Bank provides the basic ingredients

17 Peter Kilby, African Enterprise: The NigerianBread Industry (Standford, California, 1965T, pp. 94.

18 Theodore Geiger and Winifred Armstrong, TheDevelopment of African Private Enterprise (Wash i gton,D..,97TW7, p. 130.

19 NIDB Newsletter, January-April, 1980, p 5.

,

104

of economic development such as entrepreneural skills for

the initiation and promotion of projects, technical

expertise in project development, appraisal and

implementation, as well as the managerial acumen for

directing projects. It also provides medium and long term

finance, as well as equity funding for developing

projects. The mobilization of private resources is also

one of the primary functions of the Bank. The World Bank

has been and is still the Bank's major external creditor.

The bank rarely demands initial collateral. However, it

normally demands a first mortgage on the fixed assets of

the projects when it is completed and a second lien on the

floating assets. Able and responsible entrepreneurs, who

otherwise might not be able to obtain credit, could easily

obtain loans from the Bank. Appendix A is the question-

naire that the Bank requires to be completed by loan

applicants. The NIDB has financed projects for indigenous

industries such as: Awalah Hotel Limited; International

Steel Industry (Nigeria) Ltd; Delta Glass Company Limited;

Odutola Food Industries Limited and Borno Clay Products

Company Limited.2 0

20 NIDB 1980 Annual Report and Accounts (Mushin,Lagos, T9U), pp2. 1,322,72 ,31733.

105

The need for more and better entrepreneurs should not

be regarded as a problem faced by developing countries

alone. The United States Small Business Administration

has stated:

"Statistics show that over 60% of new businessesnever last over five years and the reason for themajority of failures is lack of management know-how.In fact, poor management is the reason for mostbusiness failures. Many of these men who failedbelieved that more money would solve their problemsbut found it did not."2'

Improvement in the economic environment of Nigeria,

particularly as applied to an enhanced infrastructure, is

bound to benefit Nigerian entrepreneurship.

2 1 Joseph E. Stopanek, Managers for Small Industry:An International Study (Glencoe, Ilinis,967 p.

CHAPTER VI

SUMMARY AND CONCLUSION

The major focus of this study is upon the

relationship between the economic environment in Nigeria

and its indigenous private sector from 1960-1980. An

effectively functioning indigenous private sector provides

the greatest possible assurance for long term sustained

economic development.

Nigeria, with a total land area of 356,668 square

miles is bound on the north by Niger and Chad, on the west

by Benin, on the east by Cameroun and on the south by the

Gulf of Guinea.

The country has a population of ninety million with

about 250 tribes, each speaking a different dialect.

English, however, is the official language. Christianity

and Islam are the predominant religions.

Independence was achieved on October 1, 1960, and in

1963 Dr. Nnamdi Azikiwe was elected president of the New

Republic. After a series of military coups, Shehu Shagari

was eventually elected, in 1979, as the first civilian

president since the start of the 1967 Civil War. He was

re-elected in 1983.

106

107

Development Policies in Nigeria

Nigeria's development policy is based upon mixed

capitalism with substantial aid provided by the national

government, foreign governments and international

agencies.

Industrialization in Nigeria emphasizes private

enterprise combined with the use of national development

corporations and other quasi-governmental bodies. The

late 1950's through the First National Development Plan

(1962-1968) was a period of increased economic dependency

upon foreign countries.

The spirit of nationalism dominated the Second

Development Plan (1970-1975) which introduced

indigenization.

The Third Development Plan (1975-1980), which was

more comprehensive and elaborate than the first two plans,

finally achieved the objective of mixed capitalism.

Indigenization Policy in Nigeria

The Indigenization Decree was initiated to eliminate

foreigners from certain economic fields which were to be

controlled by Nigerian citizens. It was popularly

supported by the press, opinion leaders and educators

throughout the country.

- .

108

The Indigenization Decree of 1972 was comprised

of two parts. The first listed twenty-two service

activities, and the second listed thirty-three commercial

and industrial activities, all of which were reserved

for Nigerian citizens. Under certain specific conditions,

however, these activities could be undertaken by

foreigners.

The Nigerian Enterprises Promotion Board (NEPB) was

created as the principal agency for implementing the

Decree. In its initial stage it seemed as if compliance

was falling into place; however, by the middle of 1975,

it was ascertained that large scale noncompliance existed.

This occurred through "fronting" which was a means by

which foreign firms claimed indigenous ownership. This

fraudulently entitled the foreign owners to special

benefits.

The 1977 Indigenization Decree added a new component

to the 1972 Decree and also provided the NEPB with new

authority to deal with offenders.

The Economic Environment of Nigeria

Nigeria's infrastructure is the most critical factor

affecting the operation of business. Road maintenance in

the country is extremely poor. The press regularly

109

provides information of the safety of roads, their

physical conditions and the number and locations of

the many accidents that occur.

There are six ports in Nigeria of which Lagos is

the most important and also the most congested.

The electrical, telephone and telex systems are

seriously deficient, especially in Lagos. In an attempt

to solve these problems, the Nigerian businessmen have

invested heavily in private electrical power and

communication systems.

Despite the billions of nairas spent to improve

elementary education in the 1970's the literacy rate for

the country in 1977 was only 20 per cent. The government

operates a network of secondary and higher education

schools throughout the nation.

There is widespread corruption and inefficiency among

government workers, although measures are constantly being

devised to correct the situation. Law and order is

inadequate and crime is widely reported in the press.

Entrepreneurship in Nigeria

Without the entrepreneur, who is the critical

decision maker in a capitalist economy, labor, capital

and natural resources cannot be combined effectively.

Successful entrepreneurship, however, was relatively

110

scarce between 1960 and 1980. Nigerian entrepreneurs,

especially the Ibos, have been particularly industrious

and have established many small one-man enterprises.

The Nigerian Industrial Development Bank (NIDB),

actively promoted indigenization and assisted

entrepreneurs in promising projects. The World Bank has

and continues to be the NIDB's major external creditor.

Although entrepreneurship may be considered a

characteristic of many Nigerians, indigenous private

enterprise in the country has not been especially

successful. This is due to the lack of trained personnel

upon which the success of business, industry and economic

development is dependent.

The economic environment in Nigeria during 1960-1980

was inadequate for the smooth running of an indigenous

private sector. The continuous blackouts of electricity

in the cities were extremely discouraging for potential

entrepreneurs. Bribery and corruption among high

government officials increased the cost of doing business

and further discouraged Nigerian entrepreneurship.

The training of more professionals and skilled labor,

the accessibility of valid economic information, and an

enhanced infrastructure are all bound to benefit Nigeria's

indigenous private enterprise.

APPENDIX

rwwvtls;:NOWARMI, ____ I i 11,11 1 IN gill I'l III- -MONO mmmm"m

,wAL 112

NIGERIAN INDUSTRIAL DEVELOPMENT BANK LIMITEDQuestionnaire to Applicants for NIDB Financial Participation

Answers to be addressed to:-

Managing Director,Nigerian Industrial Development Bank Ltd.,NIDB House,63/71, Broad Street,P. 0. Box 2357,Lagos.

Where there is an asterisk (*) it may be necessary to give the information on a separate sheet.

1. Name and official address of the Promoter.

2. *Names and brief biographical details of thepromoters or principal shareholders, directors,and officers with special reference to theirindustrial or commercial background.

3. If an existing Company wishing to expand,provide the annual reports of the past threeyears (including balance sheets, profit andloss accounts) and up-to-date pro-formaaccounts.

4. Please provide information about existingbank cash credit facilities of the Company(if existing) or of the main promoter(s).

5. Nature of the Project to be financed.

(a) Describe the project, and indicate whetherit relates to expansion, modernisation ora new plant. (Relative engineering,market or other documents should besubmitted).

(b) Indicate the installed plant capacityand the normal projected annual pro-duction envisaged.

*(c) Give as much information as possibleon the manufacturing process, giving aflow chart as well as the quantities,sources and prices of raw materials thatwill be required.

(d) Indicate the number of labour to beemployed, broken down into skilled,semi-skilled and unskilled and arrange-ments to be made for training.

*(e) Provide a complete list of machinerygiving detailed specifications, competi-tive quotations.

(f) Project implementation schedule:

(i) Start-off and completion ofconstruction.

(ii) Date of commencement of testproduction.

(iii) Date of commencement ofnormal commercial production.

(g) Indicate the level of utility require-ments and availability of essentialservices such as water, power, trans-port, etc.

6. State what arrangements have been made orproposed to be made for technical and overallmanagement of project and indicate whethernecessary approvals have been obtained e.g.(Approved User Scheme; Expatriate Quota;Approved Status; Pioneer Status).

7. The Total Cost of project broken down as

follows:

(i) Cost of Project

(a) Land (including site and infrastructural

development)...................

(b) Building (including office, warehouse

and housing) .................. .

(c) Fixed Plant and Machinery at f.o.b. cost;import duties: insurance; freight; trans-port to site and installation charges . .. .

(d) Power plant and installation ........ .

(e) Contingency Margin on (a)-(d) ...... .(f) Movable Plants, tools and equipments

vehicles, etc.

(g) Other items to be purchased such asoffice equipment and furniture ...... .

(h) Contingency Margin on (f) & (g)...... .

(i) Preliminary and pre-operative expenses

(j) Working Capital ................ .

Total

*(ii) If the project is already underway statewhat costs have been incurred alreadyand what costs remain to be incurredunder each of the above heads.

*(iii) Describe the factory location (if landhas been acquired, indicate whetherleasehold or freehold).

*(iv) Make an estimate by quarterly periodsof the flow of funds that will be requiredto meet the cost of the project.

113

'ooo

114

if

8. Proposed means of Financing the Projectbroken down as follows:

(a) Equity Capital

Promoters, NIDB, Others (indicate for

each) .....................

(b) Long-term Loans

Promoters, NIDB, Others (indicate for

each) .....................

(c) Short-term Loans

Commercial Banks (Working Capital)

Total

d'OAO

NOTE: (a) that, where required, NIDB's equity participation in a project cannot be less than 11% or more than 26%of the total equity capital of the project; and its overall participation, i.e. equity plus loans, cannot exceed75% of the total cost estimate of the project.

(b) that if any part of the cost of the project is to be met by overseas supplier's credits or overseas partners, theterms and conditions of such arrangements and the amounts involved should be stated.

9. Estimate the demand for the products to bemanufactured on the basis of local productionand imports for the past three years and assessfuture trend in demand.

10. Furnish information about capacity andlocation of existing manufacturers and newprojects known to be underway.

11. Give the prices of imported articles f.o.b.;c.if.; landed cost (rate of duty) and sellingprice (as appropriate).

12. Give particulars of proposed selling arrange-ments (including sole agents, if any) andcommission proposed to be paid.

13. *Provide a detailed estimate of annual cost ofproduction, giving separately the cost of eachitem of raw material, labour, essential servicesand overheads. Indicate basis for wastagefactors assumed for raw materials and per-centage of capacity utilisation.

14. Give an indication of present and expectedselling prices with comparison for competingimported and indigenous products.

115

15. On the basis of 13 and 14 above, state theexpected profit year by year until full produc-tion is reached taking into account sellingexpenses, interest on loans and debentures,depreciation, taxation, etc.

16. Provide details of Raw Material requirementsand sources of supply.

17. *Produce a Cash-flow table showing bothsource and disposition of funds annuallyuntil normal production is achieved, indicat-ing the basis for all the assumptions made inworking out the estimates.

18. State what assistance or concessions areexpected to be secured from the Governments.

NOTE:

i. To enable NIDB make inquiries of the applicants' bankers, letters addressed to the bankers should be

given to NIDB authorising the former to disclose any information NIDB might request (standard format

is obtainable in NIDS offices).

ii. A Guide to Applicants and Explanatory Memorandum which sets out in greater detail the role of NIDB

and the procedure for NIDS assistance is available on request from NIDB offices.

iii. The Memorandum and Articles of Association of the applicant Company should be sent, wherever

possible, with the answer to this questionnaire.

iv. It may be necessary to call for additional information or to invite applicants for personal interviews.

NIDB may also wish to see the site of a proposed factory or, in the case of an operating factory, see the

factory in operation.

Company Stamp and Signature

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125